Developing Pricing Strategies 4 of 5

When should a company initiate a price change?

Initiating Price Cuts To generate additional business To gain market share

A price cutting strategy may lead to possible traps

Low Quality Trap Consumers may assume quality is low

Fragile market share Trap Low price buys market share not market loyalty

Shallow Pocket Trap Competitors with longer staying capacity match the lower price

Price war Trap Competitors may reduce price even further

Initiating Price Increase

Price increase may be due to inflation or over demand Price Increase in different ways has different impact on buyers

Delayed Quotation Pricing The company doesn’t set a final price until the product is delivered

Escalator Clauses Full price plus all or part of inflation increase before delivery

Unbundling Charging extra for elements that were part of the former offer

Reduction of Discounts

Created by Ronak Jain, NIT Surat, during an internship by Prof. Sameer Mathur, IIM Lucknow.