4.initiating a price change

When should a company initiate a price change?

Companies often need to cut or raise prices

Initiating Price Cuts

• When plant capacity is excess• To dominate market through lower costs

Possible Traps

• Low quality trap• Fragile-market-share trap• Shallow-pockets trap• Price-war trap

Initiating Price Increases

To increase the profits

To sustain cost inflation

May lead to anticipatory pricing

To tolerate the Overdemand

Making the change look fair is important

Alternatives to Price Hike

• Shrinking the amount of product• Substituting less expensive materials• Reducing features of product• Reducing/removing product services• Creating new economy brands

References and Credits

• Marketing Management – Philip Kotler• http://

www.auditortrainingcentre.com/wp-content/uploads/2015/04/Time-for-change.jpg

• http://sunwiseenergy.com.au/blog/wp-content/uploads/2014/06/electricity-price-rise.jpg

• http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/v2_article_large/public/2014/09/12/handsinair.jpg?itok=sjIc-I4Y

• https://www.flickr.com/search/?q=price%20war

Disclaimer

Created by Mohith Reddy, IIT Madras

during an internship by Prof. Sameer Mathur, IIM Lucknow.

www.IIMInternship.com