Marketing Mix - Question on Impact of Changing Price
Please advise me on changes one would have to make on the marketing mix should one decide to lower prices on products.
Response from Kris:
If you want to lower your price to compete more aggressively you would first need to ensure that you have a full understanding of the cost of producing your product(s). At times you may want to still sell at a low price (even if it doesn't cover your cost but in fact it means you are losing money), because you are taking a 'loss leader' approach (see loss leader pricing for more information).
Lowering the price of your product means you need to assess your sales promotion efforts (do you need to change your differentiation and positioning strategies?); and your product packaging strategies (do you need the packaging to reflect the lower cost?); and your sales efforts (do you need to retrain your sales force to have them focus on your low cost value?); and your distribution channels (do you need to find more economical distribution methods?).
Lowering your price typically means you need to lower your costs: so look at all your cost items in the marketing mix (advertising, public relations, sales force, website, packaging and distribution costs, etc.) and see if you can save cost: for example, investing some time and resources in social media campaigns will likely be more economical than other advertising campaigns - and can have a wider, more global reach).
Do not make the decision to change price too easily: it's a decision that can not be readily reversed. If you go up in price, make sure that customers can understand and accept the reasons for the increase (large increase in cost; more value added to the production of the item; etc.). If you go down in price, make sure that you recognize that the lower price becomes the new norm - you will not be able to increase the price easily. I also recommend that you communicate a reason for the lower price: inventory sell-off; last season's sale; closing sale; or ?
Read more about Pricing Strategy