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Changes in pricing: The good, the terrible, and the ugly

  1. Pricing is crucial It’s one of the most well-known “4 Ps” of marketing (product price, price, location, and promotion). It’s a crucial component of all B2C or B2B strategic plans. An example of this could be Bryant Homes’ Pricing Strategy. They are in a competitive market, but Bryant can afford to sell its products at the top price because it has some of the best homes (products) in attractive and sought-after locations (places). In addition, its marketing literature conveys an image of luxury. Distributors, buyers, and customers, as well as competitors and economic forces, could stop firms from making price adjustments and making them stay.

Customers usually prefer a lower cost. Distributors are often looking to strike deals on price at the last minute. Companies are looking to expand market share. Changes in economic conditions can trigger adjustments without warning. What can companies do to combat the external forces that alter prices? What can a business do to stay clear of price conflict in the market? What is the best way to stop a company from losing market share?

A 1% increase in price usually results in an 11% impact on profits. In a highly competitive and volatile market, it’s more vital than ever before for pricing to receive the respect and importance it merits. It’s never a simple decision to increase or decrease prices due to strict business aims and objectives. Every change can have significant implications for your business. The decision on whether or not you want to alter prices isn’t as important as the choice of how to implement the new price.

There are a variety of factors to be considered when making price adjustments for both the long and short-term. Your pricing policy must Consider the value you can provide in comparison to your competitors You must match the price that the market will offer for your product or service. Make sure you promote your brand help you reach your market share and revenue objectives Increase your earnings.

Before you begin.


It is recommended to take a look at your branding, positioning, and strategy and determine the distribution channels you have before you change your pricing. If you do this, you’ll be able to make sure that your pricing is reflective of the value of your product and strengthen your brand. In this case, for instance If your strategy for providing value is through product leadership, you shouldn’t be able to offer a significant discount or make a bid on price.

You should also limit price conflicts with channel partners. Be aware that the price you set for your product or service affects how people perceive you and your service. If you’re viewed as a commodity, you have to alter the perception of the market by implementing a new positioning strategy, or you can compete by price and concentrate on bringing in new ideas to reduce costs to make profits. The process of raising prices or cutting them efficiently requires careful observation of the timing. It is a matter of being aware of how you can influence the customers’ perception of the value of the product you’re selling. It makes you study and predict accurately the reactions of your competitors.

Price Sensitivity.


Analysis A higher cost usually implies lower volume. However, you could earn greater profits and revenue with fewer units at a higher cost. It depends on how responsive your customers are to price changes. If they’re very sensitive, you could prefer an affordable price and significantly more units. Determine the degree to which your customers are sensitive to changes in price It helps you determine the best price and volume mix.

In addition, you will be able to calculate how a price increase could affect your sales. Certain customers are sensitive to the smallest price increases for a specific item, but are able to ignore other price increases. Dealers use this to their advantage, cutting the prices of cars as low as they can and trying to maximiser their profits on accessories that consumers are not as price-sensitive.

What Price Changes Should I Make?


Do you want to double your current price? It sounds risky, but there is a theory that a single, large price hike will help get the pain out all in one shot. If you’ve faced a major rise in your expenses from a vendor or fixed costs have suddenly increased, you may consider imposing an increase in price on your customers than what you normally feel comfortable with.

If you’re dealing with multiple products, you can consider increasing prices on certain items while keeping the other items the same or even cutting their prices. In July 2011, Netflix President Reed Hastings made a series of erroneous pricing decisions that irritated customers and almost destroyed his business. He made the choice to go with a well-loved subscription that provided access to rental DVDs and unlimited streaming.

Streaming would be split and each would cost customers $7.99 per month. That’s $15.98 for both, an increase of 60. It lost 800,00 subscribers, the stock price plummeted 77% over the course of four months, and the management’s image was on the level. Optimizing prices doesn’t always result in simply increasing or decreasing costs. Most often, changes to the features of a product or service as well as the marketing strategy (channel focus) are often the most effective strategy to improve efficiency. For example, low-cost airlines charge baggage separately from the cost of the ticket.

Timing is everything.


The majority of price increases (but they are not always) are implemented in stages, based on the notion that consumers will become accustomed to increasing costs over time and will be willing to accept these increases as they become loyal. Smaller price increases could not even be noticed by consumers who might be genuinely put off by a single price hike. If you’re deciding to raise or decrease prices it is important to choose the appropriate timing.

If you’re cutting prices, pick a time where the alteration will have the biggest impact. If you’re increasing prices, pick a time that you’ll face the most resistance. The seasonality of your business, its stage of growth and sales cycle, influences your decision. In the midst of an economic downturn, Starbucks decided to raise its drink prices by as much as 8% in 2009. It made sense to raise the prices of their drinks because their regular customers liked their drinks better than those of their competitors and were more price-conscious. For Starbucks, it was logical to raise prices in the event that the loss in profits from an additional drop in sales was less than the rise in profit that comes from a greater cost.

On the other hand, an e-commerce store that is brand new and beginning its growth phase could delay price increases in an effort to expand its market share. There are many retailers who raise prices during the season, especially around Christmas time, as shoppers rush to buy presents and don’t pay attention to the price. It could be tempting to delay the price increase until after the busy season is over but you’ll sell more units, which will result in less revenue per unit. If you’re selling B2B, the time of year won’t have any impact on the purchase.

The purchase will be based solely on need. Price gouging has a negative (ugly) image. It’s the practice of retailers raising prices for services, goods, and commodities when there is no other option available, and it’s often highlighted in news programmed following a natural catastrophe. It’s viewed as exploitation in some cases, possibly to an illegal degree, and shouldn’t be part of your cost-raising strategy.



A small percentage of companies choose one method of pricing over the other. The majority of companies try to match the prices of competitors, while others offer the advantages to the client. Research suggests that the more often businesses can change or adjust their prices, the more significant the effect on pricing decisions. Examining pricing in a systematic, analytical manner simplifies a complicated topic and provides opportunities to make improvements.