Pricing Strategy: You are the Vice President of Marketing for a business to business product company. Over the past week you have received calls from 5 of the 8 regional sales directors indicating they have lost business to competitors undercutting pricing.
What is your immediate response?
What actions would you take over the next couple of weeks?
What long-term actions would you recommend?
Notes to assist, if helpful:
Consider these methods of pricing. (There are others.)
Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into the market, and the price inevitably falls due to increased supply.
This approach is used when the marketer wants the consumer to respond on an emotional, rather than rational basis.
Product Line Pricing
Where there is a range of product or services the pricing reflect the benefits of parts of the range.
Optional Product Pricing
Companies will attempt to increase the amount customer spend once they start to buy. Optional 'extras' increase the overall price of the product or service.
Captive Product Pricing
Where products have complements, companies will charge a premium price where the consumer is captured.
Product Bundle Pricing
Here sellers combine several products in the same package. This also serves to move old stock.
Pricing to promote a product is a very common application.
Geographical pricing is evident where there are variations in price in different parts of the world.
This approach is used where external factors such as recession or increased competition force companies to provide 'value' products and services to retain sales
Companies also use cost - plus pricing. Companies using this approach start with the cost of producing the product or service and then add a markup to the product to achieve a profit. Break-even analysis is a key tool for this process.
Do you know what strategy IKEA uses? The price literally comes first for this company. The goal is to make products less expensive without making the customers feel like the products are cheap. The company surveys competition to figure out how much the "market" price for a product and then targets a price 30-50% percent below that competition. IKEA then determines the materials and manufacturer - even before the product is designed. This price-driven manufacturing is key factor in the company's success. You can find additional information about the company at
What is your immediate response? My immediate response would be considering the reasons why the competitors lowered prices. I... View the full answer