5. how should a company respond to a competitor’s price change
TRANSCRIPT
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How should a company respond to a competitor’s price change?
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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
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The response varies with the situation.
Companies must consider…
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Product’s stage in
life cycleIts 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
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I n t o A c c o u n t
Product’s stage in
life cycleIts 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
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The response will be different for
HomogenousMarkets
Non HomogenousMarkets
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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.
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Non Homogenous Markets
Certain questions need to be answers for
responding in such markets.
?
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Why did the competitor change the price?
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Does the competitor plan to make the price change temporary or permanent?
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What will happen to the company’s market share and profits if it does not respond?
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What are the competitors’ and other firms’ responses likely to be to each possible reaction?
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Market leaders often face aggressive price cutting
by smaller firms trying to build market share.
For example…
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Vs
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Vs
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Possible responses to low cost competitors
Further
differentiate the
product or service
Introduce a low
cost venture
Reinvent as a low
cost player
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Recap
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Based on “Marketing Management: A South Asian Perspective”
By Kohler, Kelter, Koshy and Jha
Credits