The Ramifications of Lowering Price During a Recession

Luxury Prices: To Cut or Not to Cut? (CNN Money)

marketing trendsOf all marketing decisions, probably the most difficult to manage are those dealing with price.  Price setting requires marketers take into consideration a wide variety of factors such as customers’ perceptions, distributors’ profit demands, competitors’ response and many more.  These issues can be even more complicated when market conditions are changes.  For instance, over the last 24 months many companies felt compelled to drop their price in order to appeal to cash-strapped customers.  But now, with signs of a recovery on the horizon, marketers are beginning to plan for the future and many are considering raising price.

But as discussed in this story, keeping price low for an extended period of time will likely result in customers adjusting their expectations of what the product should cost.  This could play havoc with companies that normally follow a premium price strategy but lowered their price during the economic downturn.  As the economy recovers these brands may find raising price back to pre-recession levels will not be an easy sell to customers and distributors.

Of special note in this story are the marketers who avoided this problem as they chose not to drop price but instead made other changes to their marketing strategy.

New York-based upscale clothing line White + Warren has gotten similarly creative. The 12-year-old line, sold in more than 500 specialty stores across the country, has long been known as a maker of luxe cashmere. For Holiday 2010, its winter collection, the label introduced lower-priced pieces in new fabrications, like under-$100 rayon tops and dresses, while holding its cashmere prices fast.

Besides the ways discussed in this story, what other methods can marketers employ to avoid heavy discounting during down times?

Image by Craig Murphy

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