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When is the "increase in prices" a solution for sales' decline? In other words, what are the things that I should keep in mind before choosing this particular solution?

Louay asked on Aug 19, 2018 - 3 answers
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Benjamin updated his answer on Aug 20, 2018
ex-Manager - Natural and challenging teacher - Taylor case solving, no framework

Hi,
I think Vlad did a very good job with listing the drivers.
I would only add to his answer that you need to consider the type of business.
In general price increase can be better managed in B2B businesses applying price differentiation to the different customers (size x industry)

BEst

Benjamin

(edited)

Vlad replied on Aug 19, 2018
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School

Hi,

You should keep in mind several factors:

  • Overall strategic objective - are we trying to increase market share or profits?
  • Nature of the product - mass vs premium
  • Price elasticity. In other words - what is the relationship between price and volumes and what are the implications of the price increase for overall revenue
  • Price perception and willingness to pay - how does the customer perceive the price?
  • Competitors pricing - will the customers switch to competitors?
  • Product differentiation and pricing tiers. What is the role of the product in your portfolio? Maybe the price should be low but you can earn more on cross-selling
  • Government regulations

Best

Someone replied on Aug 19, 2018

There are external factor that may affect the pricing strategy.

You should keep in mind:

-What other competitors are doing? Are they increasing pricing or not?

-What's your positioning in the market? Is it a low cost or premium brand?

-What customer really wants and their willingness to pay.

Sometimes sales are strongly related to brand perception where price is one of the main drivers.

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