Learning Objectives Chapter 13

8.) Explain how marketers evaluate and control pricing strategy.

• Responses to low prices- Sometimes a price war can erupt when the discount pricing used for a product is repeatedly countered by the competition. Only the sellers with the strongest financial resources are able to survive price wars.
  
  
• Responses to high prices- Competitors may react to an increase in prices by raising their own prices. All sellers will benefit, but only if the demand for the product can support the higher prices. If demand is elastic, however, sellers may sacrifice profits when increasing prices.
  
  
• Light demand- When the customer response is less than expected, marketers should reevaluate the price along with the rest of the marketing mix.
  
  
• Heavy demand- If customer response is greater than expected, marketers may still need to make adjustments. The price may be too low for the level of demand.
  
  
• Making a pricing change- Marketers should be cautious in changing prices. Higher prices could anger consumers, and lower prices could indicate to them a lower level of quality. It is therefore important to time price increases with improvements in the product.
  
  
• Avoiding illegal price discrimination- Price discrimination is the practice of charging different prices to consumers when the price difference does not reflect a cost difference to the seller. This is illegal under the Robinson-Patman Act if it substantially interferes with competition.