Developing Pricing strategies and programs : Part 5

The only element of the marketing mix that produces revenue!

The other elements

produce costs. It is also the

easiest to adjust!

Internet especially

has had a profound

impact on buyers

and sellers!

Changing pricing environment:

Easy access to credit,

enticing market campaigns,

progressive technology

Buyers can

Get instant price comparisons from a slew of vendors

Name their price and have it met (Priceline.com)

Get free products (eg: free software products)

Monitor customer behaviour and tailor offers accordingly

Give certain customers access to special prices

Negotiate prices in online auctions and in person

Sellers can

Developing appropriate

pricing strategies and

programs is

extremely important!!

How should a company respond to a

competitor’s price change?

Best response varies with the situation

Situation One: Homogenous markets

Price cut by competitor:

1) Enhance your

product 2) Lower your price if

feasible

Price increase by competitor:

Increase your price if

response of the buyers is positive

Non homogenous markets

Why did the competitor change the price?

Is the price change temporary or permanent?

What will happen to the firm’s market share and profits if it does not respond?

Are other firms responding?

What are the other competitors’ and other firms’

responses likely to be?

Price change by low cost competitors:

Further differentiate your product or service

Introduce a low cost venture

Re-invent as a low cost player

Recap:

Best response depends on situation

Possible situations:

Homogenous markets Non-homogenous markets

Low cost competitors

Thank you!