How should a company respond to a competitor’s price change?

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

The response varies with the situation.

Companies must consider…

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

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

The response will be different for

HomogenousMarkets

Non HomogenousMarkets

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.

Non Homogenous Markets

Certain questions need to be answers for

responding in such markets.

?

Why did the competitor change the price?

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

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

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

Market leaders often face aggressive price cutting

by smaller firms trying to build market share.

For example…

Vs

Vs

Possible responses to low cost competitors

Further

differentiate the

product or service

Introduce a low

cost venture

Reinvent as a low

cost player

Recap

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Based on “Marketing Management: A South Asian Perspective”

By Kohler, Kelter, Koshy and Jha

Credits