What are some other general reasons for price decline besides price war, client trying to move consumer demand back to them, or poor sales force commission structure?
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Could you please elaborate how change in product mix reduces price?
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I'd structure market based price declines this into 3 groups
- Customer (value) driven decline
- If the product value to the customer drops, their willingness to pay drops (e.g. seasonal prices for holiday homes)
- Competition driven price decline
- Price wars (capture market share, price competition out of the market, etc.)
- Substitute products
- Cost driven decline
- Raw material price decreased passed through to customer
- Experience curve (e.g. batteries for electric vehicles getting cheaper)
- Economies of scale
Beyond that you have internal price declines, due to misaligned salesforce incentives, high discounts, etc...
Price drop or reductions can be due to:
- Change in product mix
- Competitive pressure resulting in driving down prices
- Economies of scale from increasing production
- Reduction in costs of production
- Promotions
- Initial high pricing to capture early adoptors which then is reduced
- Decrease price to increase market share
Just to ad to Adi's comment (and your question) regarding product mix:
If I sell 100 products at $1 and 10 products at $10. Then I change it up and sell 50 at $1 and 50 at $10, my overall prices have changed.
Additionally, if you really want to summarize the reasons for price decline it's essentially always for increased market share/volumes.
