Reduce Price to Improve Revenues and Margins
CHOICE 1 OBJECTIVE: RETAIN CUSTOMERS
CHOICE 2 SEGMENTS: TARGETED COMPETITOR SEGMENT / STANDARD LEADER PRICE AGAINST A NEW ENTRY
CHOICE 3 COMPONENT: CHANGE THE LIST PRICE
| No. | SIC | Year | Notes |
| 1 | 1311 | 1987 | Leader (Saudi Arabia) holds price lower than market would bear to thwart new entry. |
| 2 | 2678 | 1997 | A market-leader in adhesive labels overreacted to a competitor: after a small competitor built a tiny factory, with no prospects of further expansion, the company reacted w/ a nationwide price cut of 15-20%. Gave away profitability. |
| 3 | 2800 | 1993 | The Dynamite Cartel maintained a monopoly after its patents expired by cutting prices every time demand rose by 10 to 20%, to drive out competition. |
| 4 | 2834 | 2006 | Merck & Co. is making a deal with UnitedHealth Group Inc. that prices Zocor below new generics. UnitedHealth will move Zocor into the cheapest tier on its three-tier formulary, a list of approved drugs. This will reduce the co-payment for Zocor made by patients at pharmacies to $10 from $25. Moreover, the new generic version of the drug, made by Teva Pharmaceuticals, will be in tier three, or the most expensive price group. Generic drugs typically carry cheaper co-pays than branded drugs. |
| 5 | 3510 | 1989 | Cummins policy to slash prices by as much as 40% to keep out the Japanese worked. Almost no Japanese truck engines are sold in the US today. It now holds 54% of the heavy-duty diesel engine market. |
| 6 | 3577 | 2005 | Hewlett-Packard is responding to an aggressive onslaught of printer competitors with a set of price cuts and other promotions on some of its printers. |
| 7 | 3861 | 1989 | Kodak once set prices at will on everything, but has been forfeiting increases to stave off Fuji and others. |
| 8 | 4812 | 1994 | Three carriers competed for business users by offering similar pricing schemes. As strategies converged, margins dwindled. When a new carrier entered the market in 1994 offering a different pricing plan tailored to low-volume users, the leaders copied its offer, squashing its attempt to be different. |
| 9 | 4911 | 2001 | Managers in charge of industries that are about to be deregulated often cut prices dramatically to retain customers, leading to vicious and devastating price wars. After deregulation of the German electricity market, the largest state-owned companies cut prices preemptively to avoid losing customers to Yello Strom. In two years, the average price of energy had dropped by 30% and profits tumbled. Losses across the board forced the industry to raise prices. |
| 10 | 5911 | 2007 | Whole Foods Market cut prices in response to inroads by rival organic food retailers but not to those of traditional grocers. When faced with competition from organic retailer Earth Fare, Whole Foods reduced prices by 5 percent. When Target and Kroger opened in the same area, Whole Foods did not respond with price cuts. This tactic bolstered the FTCs case against the organic retailer's purchase of Wild Oats Markets which it says will create control of too much of that market. |
| 11 | 5945 | 1988 | Toys R Us has prices year-round that are 25% below list prices.Toys R Us' pricing policy is to be preemptive, to sell at such low prices that no one will even try to compete. |
| 12 | 6021 | 2003 | Since Washington Mutual's appearance in Chicago, Bank One has increased efforts to keep its customers while attracting new ones. Bank One is advertising more and eliminating fees for items such as online bill paying. |
| 13 | 7822 | 2004 | Netflix is gearing up for the entry of Amazon.com in the already competitive online DVD rental business. Netflix is reducing prices to add subscribers to its 2.2 million total. The service requires customers to pay a monthly subscription fee to create a personal account and request DVDs online. Customers can keep the DVDs as long as they want and return it to receive the next item on the list. Wal-Mart and Blockbuster entered the market in 2002 and Netflix paid little attention. However, the possible entry of internet giant Amazon has convinced the company to lower prices; the company is popular with internet users and will advertise to those customers without having to work to gain new clients. Netflix may weather the storm because of its experience in the distribution and marketing of the service it pioneered. |
| 14 | 7841 | 2004 | Netflix has built a loyal following and has been briskly adding new subscribers to its rolls, despite the alternatives open to consumers. The company attributed its improved subscriber growth to the Nov. 1 price cut in its monthly subscription fee to $17.99 from $21.99, an effort to blunt the then-impending entry of Amazon into the DVD-rental market. |
<< Return to Choice 3