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?
(edited)
Could you please elaborate how change in product mix reduces price?
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Reasons for price decline
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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...
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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
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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.
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