Price Dynamic Analysis and Competition

Price Dynamic Analysis and Competition

• Price Discount Initiative

• Price Increase Initiative
• Price Change Reaction
 Initiating and Responding to Price Changes

Key Considerations • Circumstances leading to

price cuts:
1. Initiating price cuts • Excess plant capacity
• Declining market share
2. Initiating price increases
• Attempt to dominate the
3. Reactions to price changes market via lower costs
4. Responding to competitor’s • Price cutting traps:
price changes
• Price/quality perceptions
• Low prices don’t create
market loyalty
• Competition may match or
beat price cuts

14-3
PRICE DISCOUNT INITIATIVE
• Setelah mengembangkan struktur dan strategi penetapan harga mereka, perusahaan sering
menghadapi situasi di mana mereka harus melakukan perubahan harga atau merespons
perubahan harga oleh pesaing.
• Dalam beberapa kasus, perusahaan mungkin merasa perlu untuk melakukan pemotongan harga
atau kenaikan harga. Dalam kedua kasus, harus mengantisipasi kemungkinan reaksi pembeli
dan pesaing.
A price-cutting strategy can lead to other
possible traps:
• Low-quality trap. Consumers assume quality is low.
• Fragile-market-share trap. A low price buys market share but not
market loyalty. The samecustomers will shift to any lower-priced firm
that comes along.
• Shallow-pockets trap. Higher-priced competitors match the lower
prices but have longerstaying power because of deeper cash reserves.
• Price-war trap. Competitors respond by lowering their prices even
more, triggering a price war
PRICE INCREASE INITIATIVE
• Delayed quotation pricing. The company does not set a final price until the
product is fin- ished or delivered. This pricing is prevalent in industries with long
production lead times, such as industrial construction and heavy equipment.
• Escalator clauses. The company requires the customer to pay today’s price and
all or part of any inflation increase that takes place before delivery. An escalator
clause bases price increases on some specified price index. Escalator clauses are
found in contracts for major industrial projects, such as aircraft construction and
bridge building.
• Unbundling. The company maintains its price but removes or prices separately
one or more elements that were part of the former offer, such as free delivery or
installation. Car companies sometimes add higher-end audio entertainment
systems or GPS navigation systems as extras to their vehicles.
• Reduction of discounts. The company instructs its sales force not to offer its
normal cash and quantity discounts.