Describe the role of pricing during periods of inflation and recession. Marketing managers employ cost-oriented and demand-oriented tactics during periods of economic inflation. Cost-oriented tactics include dropping products with a low profit margin, using delayed-quotation pricing and escalator pricing, and adding fees. Demand-oriented pricing methods include price shading and increasing demand through cultivating selected customers, creating unique offerings, changing the package size, and heightening buyer dependence. To stimulate demand during a recession, marketers use value-based pricing, bundling, unbundling, and making strong promotional claims while avoiding discounting.
Recessions are also a good time to prune unprofitable items from product lines. Managers strive to cut costs during recessions in order to maintain profits as revenues decline. Implementing new technology, cutting payrolls, and pressuring suppliers for reduced prices are common techniques used to cut costs. Companies also create new value-added products.
1. During a recession, what pricing strategies would you consider using to gain or maintain market share? Explain your answer.
2. After a decade of astounding growth and prosperity, Americans were challenged by the economic downturn of the early 2000s. As a result, pricing became an issue for many consumers looking to pinch pennies. This was also true in areas where penny-pinching isn't a common occurrence, like high-end retailers. Search The Wall Street Journal online archives (www.wsj.com) to find an article about pricing during a recession.