The document discusses how a company should respond to a competitor's price change. A company's response depends on several factors: the product's stage in its lifecycle, its importance to the company's portfolio, alternative opportunities for the company, market sensitivity to price and quality, the competitor's intentions and resources, and how costs change with volume. The response also differs for homogeneous versus non-homogeneous markets. In homogeneous markets, a company may need to match a price reduction if it cannot enhance its product, while in non-homogeneous markets a company needs to consider why its competitor changed price and how its own market share and profits may be impacted if it does not respond.

1. How should a company respond to a
competitor’s 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. The response varies with the situation.
Companies must consider…

4. Product’s stage in
life cycle
Its importance in the
company’s portfolio
Company’s
alternative
opportunities.
Market’s price and
quality sensitivity
Competitor’s
intentions and
resources
Behaviour of costs
with volume

5. I n t o
A c c o u n t
Product’s stage in
life cycle
Its importance in the
company’s portfolio
Company’s
alternative
opportunities.
Market’s price and
quality sensitivity
Competitor’s
intentions and
resources
Behaviour of costs
with volume

6. The response will be different for
Homogenous
Markets
Non Homogenous
Markets

7. Homogenous Markets
The firm can search for ways to enhance
its augmented product. If it cannot find
any way, then it may need to meet the
price reduction.

8. Non Homogenous Markets
Certain questions need to be answers for
responding in such markets.
?

9. Why did the competitor change the
price?

10. Does the competitor plan to make the
price change temporary or permanent?

11. What will happen to the company’s market
share and profits if it does not respond?

12. What are the competitors’ and other firms’
responses likely to be to each possible reaction?

13. Market leaders often face aggressive price cutting
by smaller firms trying to build market share.
For example…

14. Vs

15. Vs

16. Possible
responses to low
cost competitors
Further
differentiate the
product or service
Introduce a low
cost venture
Reinvent as a low
cost player

17. Recap

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