Question

Analyze how the company's pricing policies depend on how consumers respond to price changes? Identify and discuss the different factors that affect consumer responsiveness to a company's price change (availability of substitute, taste, income etc.). Please also discuss the different strategies used by P&G to increase profitability.

Answer 1

Answer

The company's pricing policies depend on how consumers respond to price changes as before adopting any policy regarding their products company considers the attitude of their consumers towards their products, they analyse how much responsive the consumers are about the price change, if the number of consumers will drop after the price change or loyal consumers will maintain the demand.

the following factors affect consumer responsiveness to a company's price change:

* how much the price has changed: if the change in price is very small and does not make much difference to the consumer's budget constraint than the consumer will not be very responsive

* the availability of substitutes: if the product have close substitute and their prices are more cheaper than the consumer will be very responsive to the price change.

* the durability of the product also affects consumer's responsiveness towards company's price change.

* loyalty of the consumer towards the product also affect its responsiveness. if the consumer is loyal towards a particular product or company's brand than he will be less responsive to the price change.

P & G uses different strategies to increase its profitability:

*   it has made different market strategies for different consumer groups to attract more consumers

* they have different prices for their products in different markets.

* they maintain the quality of their products

* their growth strategies are very intensive which covers their suppliers, retailers and consumers etc.

* they provide large profit margins to their retailers to increase their market shares

* their investment plans and growth strategies are more consumer focused which increases consumers' trust in their products