Pros and Cons for Price Change Initiation

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(1)Is it necessary for a company to initiate a price change? What are the pros and cons for price change initiation? Provide examples:

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Organizations and companies adjust the price of their product in response to varying atmosphere in the marketplace. The change in price if well planned reduces risk of damaging companys market share, but there is always a risk of losing customers to a competitor. Increasing the price of a product is the desire of any company because that will increase the revenue of the company. Often times when prices go up it is because of inflation, which forces the manufacturers into increasing the cost of their production. I have also seen cases where by a company increased the price of its product just to reduce demand of its product. These are in cases where they cannot meet the supply of the demanded product. An example is the collaboration between Kanye West and Adidas to produce Yeezy footwear. At the beginning of production, they had 5000 pair of sneakers in production, but they have received more than a million preorder for the said sneakers. So Adidas had to increase the price of the sneakers just to equate demand to supply. Then prices do not just go up, they as well decrease with respect to the changes in the market also. In other to achieve higher sales volume companies with excess capacity reduces the price of their products. A typical example is the Telecom companies, at the beginning of the Boom in some developing countries the price of a sim card was over the roof but that hindered sales. In other to increase sales, they had to reduce the price and the product available to all willing customer and that in essence increased their market share and attracted investors into the market. Although lowering the price is very move. This is because oftentimes it invites swift response from the competitor and can lead to a war of price. If not well planned it can lead company into low quality trap, fragile market trap, shallow pocket trap etc. If the change in price is inevitable then the company can implement these strategies to help mitigate loss (a) increase customers perceived value of product by increasing promotion of the product. (b) Improve quality of the product (c) Introduce a new lower price brand to the current product line and place it directly with competitors products. (d) You can reduce the price to offset the unpleasant effects of the price assault.

(2) The text describes various techniques for promotional pricing. Pick any one; identify a specific company that has used the approach and evaluate the effectiveness.

Not surprisingly, pricing strategy has proven to be a fruitful area of research for marketers. Marketing scientists have provided both theoretical predictions and empirical evidence concerning the types of consumers that different pricing policies are likely to attract (e.g. Lal and Rao, 1997; Bell and Lattin, 1998). Walmart implements an Everyday Low Price (EDLP) pricing strategy. In fact, Everyday Low Price advertisements are placed boldly on Walmarts walls in the stores. The aim and objective of this promotional pricing strategy is to entice and attract large populations of customers to buy from their stores instead of going to their competitors. This strategy enables Walmarts business plan, which is cost leadership. Walmart has a low costs and low prices strategy. However, the large sales volume enables Walmart to generate profits. Thus, in the marketing mix, the pricing component is the main contributor to Walmarts competitiveness. You can say that this strategy has worked for them so well because not so many companies were able to pull off the success which Walmart has been enjoying since the birth of that strategy. The successful planning and introduction of promotional pricing strategy requires a detailed knowledge about the impact of changes in prices over the choice of a brand. This knowledge may be got by means of the own and crossed elasticises of a brand (Krishnamurthi et al., 1994).

(3) Customer Support is a key component to managing service marketing. Why do some companies place little emphasis on service excellence? Identify a company that can improve service excellence. What steps should they take and what would be the impact.

Service marketing and customer support service are bad at most places, this is because evidently, that is what CEOs and managers want. What other reason could there be for them to accept such miserable performance? Most care more about selling than serving. We know that when sales decline, companies will buy ads, offer new customers better deals than existing ones, deliver training, hold major events, and take any number of extraordinary measures to pump up revenue. They are passionate and precise about customer acquisition but reserved and reticent about customer retention. A typical example is the Rose hotel in Miami; Rose hotel had been open for eleven years before its management determined that two-thirds of all guest calls to housekeeping were to request ironing boards. This discovery prompted the idea of simply placing irons and ironing boards in all of the hotels guest rooms, an idea that would cost $15,000. The hotel manager reviewed the capital budget and saw $18,000 to replace black-and-white television sets in the bathrooms of concierge-level guest rooms with color sets. The manager then inquired how many VIP guests had requested color television sets for their bathrooms and learned that no guest had ever made such a request. Therefore, the manager instead of eliminating the color television sets and add the irons and ironing boards with no net addition to the capital budget, he went ahead to buy the television. What happened is that the hotel revenue suffered a great decline all because less attention to services improvement. I begin with this story to make two critical points. The first is that customers are the sole judge of service quality. Customers assess service by comparing the service they receive with the service, they desire. A company can achieve a strong reputation for quality service only when it consistently meets customer service expectations. To turn around this customer service flop I advise they take some measures to improve the quality of their services. The first thing to do is define your key customer segments and attribute an overall value to each in terms of what they generate for the business. Which segments deserve most attention? Hold regular focus groups with customers from these segments to see their needs. Conduct wider online/email surveys with larger number of customers to get a broader view of needs. Have effective feedback mechanisms, for capturing complaints, and for gathering general satisfaction data; analyses this information regularly in a meaningful way to identify areas for improvement. Have systems for capturing and sharing the preferences of existing customers so that you can wow them with your tailored service.

(4) Why is Intangibility a distinctive characteristic of Services? What can a company do to tangibilize the intangible? Provide examples

Talking about creating tangibility sounds like an easy task, but it is not always the case. You start by trying to find tangible representations that enables customers understanding of the services you offer. A typical example of tangibles include you and your history, your employees, how they present themselves, your website, testimonials etc. Most people think that they include very expensive painting hanging on the wall, a prestigious office in a business center or a pretty face sitting at your front desk. When trying to tangible the intangible the business owner must have in mind that standardization of service products is an uphill task. This is because primarily individuals deliver them. When these people makes any mistake what is directly comprises satisfactory delivery. Companies like Starbucks, produce standardization via constant and intense employee training. Although because they hire uneducated and young employees, revenue is, high and performance can sometimes be questionable. To mitigate this possibility one should engage in constant follow up after training, rewarding for excellence and monitoring as well. With the tech industry, now producing a lot of software and programs one can tap into it to help. This is because a balance between people and computer yields more results. Service providers have three options to help in turning intangibles into tangible. They include (1) Observation and testing, here you determine what parts of your service delivery are most comfortable for your customers. (2) Then you move to education and training of your customers to participate by doing their part. (3) Follow up and monitor your customers with respect to their ability to perform their assigned tasks and make adjustments where it is applicable.


Ghemawat, P., & Mark, K. A. (2006). The Real Wal-Mart Effect. Harvard Business School.

U.S. Department of Commerce (2015). The Retail Services Industry in the United States.

Athey, S. and Schmutzler, A., Investment and Market Dominance, RAND Journal of Economics, 32(1), (2001) pp. 1-26

Tarn, David (2005). "Marketing-Based Tangibilsation for Services". The Service Industries Journal: 750.

Independent newspaper(25th feb 2015)

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