Markets will go through several phases of development depending on the purchasing power and decisions customers make. After maturity, a period of decline emerges whereby sales and profits remain flat or start to reduce. Professionals and business leaders should implement superior strategies to overcome some of the challenges that might emerge in such a situation. This paper describes some of the pros and cons that will emerge when firms increase the prices of the affected products when the selected market declines.
Advantages of Increasing Prices
In declining markets, marketers need to consider the most appropriate pricing strategies to ensure that positive results are recorded. One of the leading approaches is that of increasing prices for the affected commodities. Some advantages are associated with strategy in declining markets. First, the initiative will ensure that the company maximizes the recorded returns from the remaining products. Customers who are in need of such services or items will be ready to purchase them and make it possible for the business to take out most of the invested capital (De Toni et al., 2017). The end result is that the specific marketer will record positive gains.
Second, the approach is capable of taking the level of competition to the next level by ensuring that the company is capable to accrue the intended returns. More customers who require premium products will examine the offered price (Civale, 2016). Consequently, the organization will be in a position to maximize their returns. Third, the suggested strategy will allow the company to retain its image for the longest time possible (De Toni et al., 2017). This achievement will amount to brand equity and eventually ensure that the designed new products remain competitive.
Disadvantages of Increasing Prices
When markets start to decline, entrepreneurs can consider various procedures and decisions to achieve their maximum potential. When the final option is to increase prices, several challenges or disadvantages will emerge that have the potential to affect future performance. The first one is that more customers will not be interested in the selected products or items (De Toni et al., 2017). Consequently, the company will find it hard to achieve its business aims within the stipulated period. The second issue is that the strategy is capable of becoming counterproductive and forcing more customers to identify alternatives available at reduced prices.
The third possible disadvantage of increasing prices is that it can affect the performance of other products whose market is still developing. This outcome is possible since many customers tend to view all offerings associated with the same company collectively (Civale, 2016). Finally, the approach can make it possible for the organization’s marketers to focus on emerging markets and how to gain the most from them. Leaders of business organizations should, therefore, consider most of these issues if they want to succeed from a declining market and remain sustainable or profitable in some of the emerging ones.
The above discussion has revealed that markets will go through different phases. Entrepreneurs should be aware of the final stage of decline and how it can disorient business performance. Decision-makers in the area of marketing should be aware of the potential dangers and benefits of increasing prices. In conclusion, these arguments and insights will support the formulation of the most appropriate marketing strategy depending on the anticipated business goals.
Civale, S. (2016). Has the decline in the price of investment increased wealth inequality?
De Toni, D., Milan, G. S., Saciloto, E. B., & Larentis, F. (2017). Pricing strategies and levels and their impact on corporate profitability. Revista de Administração, 52, 120-133.