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When should a company initiate a price change?
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4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Aug 16, 2015

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Page 1: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

When should a companyinitiate a price change?

Page 2: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

By,

Anurag Kar

B.Tech. Student

Department of E and ECE

IIT Kharagpur

Based on Chapter 3: Developing Pricing

Strategies and Programs

Of

Marketing Management: A South Asian

Perspective

By Kotler, Keller, Koshy and Jha

Page 3: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Initiating Price Cuts

Page 4: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Companies may initiate price cuts for various

reasons…

1. Excess plant capacity

2. To dominate the market through lower costs

3. Need additional business which is not being

generated through increased sales effort,

product improvements, etc.

Page 5: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

But a price cutting strategy can lead the company

to certain

TRAPS

Page 6: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Consumers assume

quality is low.

Price CuttingTraps

Low-Quality Trap

Page 7: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Low prices buy market share

but not market loyalty.

Customers shift to any lower

priced firm that comes along.

Price CuttingTraps

Fragile Market

Share Trap

Page 8: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Higher priced competitors match

the lower prices but have longer

staying powers because of

deeper cash reserves.

Price CuttingTraps

Shallow-Pockets

Trap

Page 9: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Competitors respond by

lowering their prices even more,

triggering a price war.

Price CuttingTrapsPrice War Trap

Page 10: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Price CuttingTraps

Low-Quality Trap

Fragile Market

Share Trap

Shallow-Pockets

Trap

Price War Trap

Page 11: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Initiating Price Increases

Page 12: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Price increases can raise profits considerably,

assuming the sales volume remains unaffected.

Page 13: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Company does not set a final

price until the product is

finished or delivered.

Price IncreasingTactics

Delayed Quotation

Pricing

Page 14: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

The company requires the

customer to pay today’s cost and

all or part of inflation increase

that takes place before delivery.

Price IncreasingTactics

Escalator

Clauses

Page 15: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

The company removes or prices

separately elements that were

part of the former offer.

Price IncreasingTactics

Unbundling

Page 16: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Company instructs its sales

force to not offer the normal

cash and quantity discounts.

Price IncreasingTactics

Reduction of

Discounts

Page 17: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Price IncreasingTactics

Delayed Quotation

Pricing

Escalator

Clauses

Unbundling

Reduction of

Discounts

Page 18: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Although there is a chance that price rise can

carry some positive meanings.

Eg. The item is in demand and represents and

unusually good value…

Page 19: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Customers usually DO NOT LIKE

higher prices.

Page 20: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Hence marketers find alternate approaches to

avoid price rise.

Page 21: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

1. Shrinking the amount of product.

2. Substituting less expensive ingredients.

3. Reducing or removing product features.

4. Removing or reducing product services.

5. Reducing the number of sizes or models offered

6. Creating new economy brands.

Page 22: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Recap

Page 23: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)
Page 24: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)
Page 25: 4. When should a company initiate a price change? (Chapter 13) (Anurag Kar)

Pictures Sourced from:

www.flickr.com

www.pinterest.com

http://commons.wikimedia.org

www.theguardian.com

Fonts Sourced from:

www.fontsquirrel.com

Based on “Marketing Management: A South Asian Perspective”

By Kohler, Kelter, Koshy and Jha

Credits