Impact of Price Drops on Consumer Markets

The assignment examines how price drops affect consumer markets, emphasizing that their impact varies depending on product demand, supply chain dynamics, industry type, and customer buying behavior. It highlights the importance of market analysis and understanding consumer psychology for effective pricing strategies.

Running head: PROFESSIONAL COMMUNICATION
Professional Communication
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Table of Contents
Introduction................................................................................................................................2
General Principal and relevant Concepts...................................................................................2
Application of price drops in retail/grocery and electronic industry.........................................4
Effect of Price Drops among customers and business man.......................................................5
Conclusion..................................................................................................................................6

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Introduction
The price of different product is one of the important parameter which decides upon
the supply and demand rate in the market. It is often believed that in slow Economic growth
circumstances, it is often effective to lower the level of pricing of consumer products. Lower
level of pricing will thereby help to increase the total amount of sales and hence, more profit
can be earned. However, according to many expert economists, the pricing strategy of a
product should be done according to the level of demand. If the prices of the products are
raised too high by the sellers, where the demand of a product is less than they can offer it will
end up having surplus products. The sellers, will then have to sell those products act much
lower rate until and unless the stock is over. On the other hand is the prices of the products
are set too low, and then it will be possible to sell the entire stock before the demand is being
fulfilled. This will ultimately lead to a shortage of consumer products with in the market.
Moreover it will lead to more loss for the sellers.
With increased level of prices, the total number of suppliers for a product also
increases due to the fact that they are able to make better amount of profit. The demand of a
product also increases due to lowering price level. In the given context, the current report will
discuss about the effects of pricing drop that are done in business with the intention of
improving the profit level. The effects of price drops will be discussed by comparing the
same across different industries.
General Principal and relevant Concepts
According to the work of Ingenbleek et al. (2013), the prices of product are generally
being decided with the approach of choice between market penetrating price and market

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skimming. Research paper also highlighted about various complexities that are involved in
the consumer market about deciding the level of prices during the time of product entry. It is
important for the marketing manager to use different parameters in order to compare the
pricing of a product that has been introduced in the market. This comparison is being made
with similar kinds of products, which are already present in the market. The high level of
complexity that is involved in deciding upon the pricing of a product is due to the fact that if
prices are too high, then a company might lose majority of the potential customers. Hence,
according to Ingenbleek et al. (2013), during the time, when a new product is being
introduced in the market, the prices are generally kept at lower level. The negative impact of
this decision making process is due to the fact that it can compromise upon the immediate
profit potential that a company could have made. With high level of profit, it can also be
possible for the company to improve upon the features and quality that are being offered
within a particular product. Another negative aspect of this strategy is due to the fact that
most of the Potential customers might lose trust over the product due to the fact that most of
the customers have a belief that is not possible to get good quality product at lower level of
pricing. Hence, the reputation of the product is at stake in long term process. Alghalith, et al.
(2014), have suggested that new pricing techniques will be implemented that can help in the
process of deciding the product pricing.
Hence, it is evident that Product pricing strategy is an important criterion, which
decides upon its market performance. The pricing of a product should be decided upon its
current market value and demand among the consumers. The level of competition or cost
informed pricing strategy along with value informed pricing strategy is being used in the
current techniques. Thereby it can be said that lowering the level of prices may not be an
effective technique as the cost of the product will always depend upon current market
demand among the potential customers.

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The research paper of Tappata (2006), has discussed the effects of the poor level of
information that are being provided to the customers while deciding upon the pricing of a
product. It is important for the business organisations to provide the correct information about
the factors, which decides upon the price of a product. The customers often face price
dispersion due to the fact that the same product can have different level of pricing across
different stores or brands. The research paper of Tappata (2006), highlighted about the term
called Consumer search price, which is the cost the customers have to bear, while they shift
from one brand to other in the intention of getting the product at much lower rate. It has been
seen that in many markets the price of consumer product rises at much greater rate than it
falls, which is at much lower rates. This can be one of the major reasons for lower level of
competitive advantage among many business firms. Hence it is evident from the fact that the
companies should have the potential to fluctuate their pricing of product depending upon the
current market demand. As the companies are able to fluctuate the pricing depending upon
the customer's demand, it is possible for them reduce the cost of the search price that are
spent by the customers.
Application of price drops in retail/grocery and electronic industry
According to Wu et al. (2016), the business forms selling basic consumer products
like grocery or retail items need to have effective pricing strategies depending upon the
situation of the market. Fluctuations in the pricing of basic consumer product can have
significant effect on the profit level of a company. However, Berg et al. (2015), argued about
the fact that companies do not have to face high level of challenge while deciding upon the
price of retail and basic grocery products due to the fact that the demand of these products
are always high. This therefore provider company the opportunity to impose high level of
pricing. There are very minor changes among the customer with the fluctuation in the pricing

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of basic grocery products. The demand of the grocery product is always high among the
consumer market and is irrelevant of the level of supply within the market.
Carranza et al. (2015), have mentioned about the fact that retail and grocery
manufactures rely upon the price promotion strategies that is one of the effective ways to
increase the level of sales in the market. This can have serious effects on the overall revenues
that are being made by the companies. From the research work of Modak et al. (2015), it is
clear about the fact that lower pricing strategies can have little level of long term effect on the
overall volume of sales. The revenue and the profit margin also can quickly get back to the
baseline. On the other hand, the effects on the short term scale can be both positive and
negative, which depends upon the situations.
The effects of the price drops within the electronic industrial products are quite
different from that of the retail or grocery products. The most relevant and basic differences
between this industry is due to the fact that the demand of the electronic products are quite
low compared to that of the retail or grocery products. Hence, unlike the customer’s products
in the retail industry, the manufactures in the electronic products do not have the opportunity
to higher the prices of the products. Moreover, due to the fact that there is more number of
electronic suppliers in the market than the rate of actual demand, the surge in the price can
thereby have the effect of lowering the sales volume (Kassakian and Jahns 2013).
Effect of Price Drops among customers and business man
Mao et al. (2017), have mentioned about the fact that the buying decisions that are
made by the customers are dependent on the level of pricing. It is also relevant to mention in
the context that the effects of the price drops can vary among different types of groups. This
mainly depends upon the fact that many customers do not have faith over the quality of the
products, when the prices of the products are lowered. On the other hand, the companies can

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make more profit from certain group of customers. From the point of view of the business
owners, it is essential from them to decide upon the policy of price drops depending upon the
buying behaviour or the psychology of the target groups of customers.
Conclusion
On the conclusion note, it can be said that the effects of price drop can vary within the
consumer’s market depending upon the level of demand of particular products. It is the duty
of the marketing managers to analyze the level of the demand market and the volume of the
supply chain. The effects of the price drop in the consumer market can vary depending upon
the types of industry and the type or buying behaviour of target customer’s groups.

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Reference
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