The document discusses competitive pricing strategies and the factors influencing price changes among competitors, such as customer sensitivity to price and the presence of alternative products. It presents a scenario involving Coca-Cola and Pepsi to illustrate how price adjustments can affect market share and consumer choices. Additionally, it includes a practical example of Gillette's pricing strategy that led a customer to switch to a competing brand.

3. Competitors
Competitors are companies that satisfy the same
customer needs.

4. Price changes
Competitor’s may change their prices under two
conditions:

6. 1. Most customers are price-conscious
1 Lunch Box Rs.100 Ok.. Just Rs.80
Akka Shop
Pragash
Shop

7. 2. There are several competitors with quality products.

8. 3. Product features are easily copied and products are close
substitute.

9. 4. Can get information about the competitors cost
structure.

10. 5. Some competitors are financially strong.

11. 6. Sealed-bid pricing conditions

13. No
Yes
No
Has competitor
cut price?
Will lower price negatively affect
our market share and profits?
Can/Should effective
action be taken?
Hold current price continue
to monitor competitor’s
price
Reduce price
Maintain price add value
Improve quality and
increase price
Launch lower-price “Fighter
line”
Yes
Yes
No

15. Cost concentration – If a company’s cost is higher than
competitors, it may not able to price at or below competition and
survive.
Customer thinking - If a customer use price as an indicator of
quality, they may avoid products priced below competition

17. P1
P2
Q1 Q2
P1
Q1Q2
Coca-cola
Pepsi
Price Price
Quantity Quantity
Suppose the price of Coca-Cola decrease from p1 to p2, this would cause
people to consume more Coca-Cola (Quantity increase from Q1 to Q2)
because people thing in price wise coca-cola is cheaper than pepsi, so they
switch their consumption from pepsi to coca-cola. Therefore pepsi will lose
their demand. At this time pesi should respond to the coca-cola’s price
change.

18. Practical example
Jordan says that Gillette is adding a razor blade to their 4-pack. And raising the
price $5.
A couple of weeks ago, I was at Target, and I saw that all of their Mach 3 cartridges
were on clearance. As a Mach 3 user, I was kind of concerned as to what was going
on. I hoped that they weren't discontinuing the Mach 3 and Mach 3 turbo and
forcing everyone to buy their newest razor.
Last night I was at the grocery store and wandered down the shaving aisle, and lo
and behold, Mach 3 razors now only come in a 5-pack. Not only that, the price has
been jacked way up.
A 4-pack of Mach 3 turbo blades was about $8.99. The new 5-
pack costs $13.99. So they give you one extra razor for extra 5
dollars. Thanks, Gillette. I am now switching to Schick.
(http://consumerist.com/2008/03/gillette-charging-an-extra-5-for-one-
additional-razor-blade.html)