INITIATING PRICE CHANGE

Initiating Price Cuts

WHY???

EXCESS CAPACITY

DOMINATING MARKET SHARE

Low Quality Trap -Customers’ Perception

Fragile-market-share Trap -Customers shift to any low priced firm

Shallow-pockets trap -Higher Priced competitors match the lower price, but stay longer in power due to deeper cash reserves

Price-war trap Competitors respond by lowering their prices even more

Initiating Price Increases

Delayed Quotation pricing

The company does not set a final price until the product is finished or

delivered

Escalator ClausesThe company requires the customer to pay today’s

price and all or part of any inflation increase that takes place before delivery

UnbundlingRemoves free delivery or

installation

Reduction of DiscountsNo more normal cash and quantity

discounts

Smart Vending Machines -Raise prices as temperatures rose

ALTERNATIVE APPROACHES AVOIDING INCREASING PRICES

Shrinking Amount

Substituting less-expensive ingredients

Using less expensive packaging

Created by Subhasis Panda, IIT Bombay, during an internship by Prof.Sameer Mathur, IIM Lucknowwww.IIMInternship.com