Based on Chapter 13 of Marketing Management : An Indian Perspective by Kotler, Keller.

1. When should a company
initiate a price change?

2. By,
Anurag Kar
B.Tech. Student
Department of E and ECE
IIT Kharagpur
Based on Chapter 3: Developing Pricing
Strategies and Programs
Of
Marketing Management: A South Asian
Perspective
By Kotler, Keller, Koshy and Jha

3. Initiating Price Cuts

4. Companies may initiate price cuts for various
reasons…
1. Excess plant capacity
2. To dominate the market through lower costs
3. Need additional business which is not being
generated through increased sales effort,
product improvements, etc.

5. But a price cutting strategy can lead the company
to certain
TRAPS

6. Consumers assume
quality is low.
Price Cutting
Traps
Low-Quality Trap

7. Low prices buy market share
but not market loyalty.
Customers shift to any lower
priced firm that comes along.
Price Cutting
Traps
Fragile Market
Share Trap

8. Higher priced competitors match
the lower prices but have longer
staying powers because of
deeper cash reserves.
Price Cutting
Traps
Shallow-Pockets
Trap

9. Competitors respond by
lowering their prices even more,
triggering a price war.
Price Cutting
Traps
Price War Trap

10. Price Cutting
Traps
Low-Quality Trap
Fragile Market
Share Trap
Shallow-Pockets
Trap
Price War Trap

11. Initiating Price Increases

12. Price increases can raise profits considerably,
assuming the sales volume remains unaffected.

13. Company does not set a final
price until the product is
finished or delivered.
Price Increasing
Tactics
Delayed Quotation
Pricing

14. The company requires the
customer to pay today’s cost and
all or part of inflation increase
that takes place before delivery.
Price Increasing
Tactics
Escalator
Clauses

15. The company removes or prices
separately elements that were
part of the former offer.
Price Increasing
Tactics
Unbundling

16. Company instructs its sales
force to not offer the normal
cash and quantity discounts.
Price Increasing
Tactics
Reduction of
Discounts

17. Price Increasing
Tactics
Delayed Quotation
Pricing
Escalator
Clauses
Unbundling
Reduction of
Discounts

18. Although there is a chance that price rise can
carry some positive meanings.
Eg. The item is in demand and represents and
unusually good value…

19. Customers usually DO NOT LIKE
higher prices.

20. Hence marketers find alternate approaches to
avoid price rise.

21. 1. Shrinking the amount of product.
2. Substituting less expensive ingredients.
3. Reducing or removing product features.
4. Removing or reducing product services.
5. Reducing the number of sizes or models offered
6. Creating new economy brands.

22. Recap

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Based on “Marketing Management: A South Asian Perspective”
By Kohler, Kelter, Koshy and Jha
Credits