This document discusses developing pricing strategies and programs. It covers when companies should initiate price changes, reasons for price cuts or increases, and potential risks and alternatives. Price cuts may be used to reduce excess capacity or dominate markets, but can trigger price wars or lose long-term customer loyalty. Price increases are often due to cost inflation or high demand. Companies can avoid raising prices by shrinking product amounts, substituting cheaper ingredients, reducing features or services, using less expensive packaging, or creating new economy brands.

1. DEVELOPING PRICING
STRATEGIES AND PROGRAMS

2. Whenshould a company initiate
price change?

3. INITIATING PRICE CUTS

4. Why are price cuts required?
Due to excess plant capacity To dominate market

5. TRAPS due to price cutting
strategy

6. .
competitors respond by lowering
their prices, triggering a price war
Price war trap

7. Fragile market trap- a low price buys
market share but not market loyalty

8. Lower quality trap-
consumers assume price is
low

9. INITIATING PRICE INCREASES

10. DO YOU KNOW ?
If a company’s profit margin is 3% of
sales, a 1% price increase will
increase profits by 33% if the
volume is unaffected.

11. Why
prices increase?

12. Cost inflation (increase) Over demand

13. How
To increase prices?
Delayed quotation
Escalator clauses-
Unbundling
Reduction of discounts

14. Alternative approaches that
avoid increasing prices

15. Shrinking the amount of product

16. Substituting less-expensive
ingredients
Many candy bar companies substituted
synthetic chocolate for the real
chocolate to fight cocoa price increase

17. Reducing product features

18. Reducing product services
Such as installation or free delivery

19. Using less expensive packaging

20. Creating new economy brands
TATA introduced Titan for high class
people and sonata for middle class
people

21. LET’S RECAP
Initiating price cuts
Initiating price rise
Alternatives to price rise

23. Created by :
Tanvi Maheshwari
Lady Shri Ram College for
Women,
during an internship by
Prof. Sameer Mathur,
IIM Lucknow