Just wondering why increasing prices is an answer option here for disposable pens?

Question

The question asks that since sales are flattening what suggestions would you make to increase revenue - so would increasing the price of disposable pens, not really a differentiated product, be an option to increase revenue?

Answer 1

Hi there,

You're not wrong in regards to when/how you can/can't increase prices.

However, why would you eliminate it so quickly? A good framework encapsulates all reasonable options! As such, you should consider price increases, even if you note that it is unlikely (unlikely, but still worth investigating IF other, more likely, options don't pan out). Importantly, we do not know if we are the only supplier of pens or not. You have made that assumption...but we might be a monopoly and therefore be able to charge a different price. You can't just eliminate it without checking!

As you see, the case evaluates whether the company can go into the premium market. This is a price increase and may only require a slight rebranding or modification of the pens...it's worth investigating!

Just to clarify again, it's unlikely to be able to increase prices, but it's worth looking at. We need to measure the elasticity of demand and see the competitive landscape before we make this determination.

Answer 2

Hello!

Thinking about this OUTSIDE the case, since this is a good lesson for casing in general: increasing the price of somthing without improving the value proposition is NEVER going to work. Hence, you will never fix a revenue issue like this: not in this case, or any other.

Hope it helps!

Cheers,

Clara