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

Incos Pens
New answer on Dec 10, 2020
2 Answers
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Anonymous A asked on Dec 09, 2020

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?

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Ian
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replied on Dec 09, 2020
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

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.

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Clara
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replied on Dec 10, 2020
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

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

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Ian

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