Reduce Price to Improve Revenues and Margins
CHOICE 1 OBJECTIVE: RETAIN CUSTOMERS
CHOICE 3 COMPONENT: CHANGE THE LIST PRICE
|Last week, Philip Morris's cereals division chopped 20% off the list prices of Grape-Nuts and Raisin Bran and promised to get rid of discount coupons.
|AB's pricing strategy was to raise prices enough to cover cost increases, but not so much that they allowed competitors to make significant margin gains. Since AB's costs were the lowest in the industry, a great deal of pressure was placed on competing brewers' margins. AB was very careful not to raise a price umbrella. As a result, margins of the smaller competitors suffered since they did not have a cost structure as low as AB's. Its size and national coverage has allowed it to vary prices for different customers in different regions to hold off regional competition. By keeping price increases low, AB has made beer more attractive to the end-user, but did not necessarily attract customers to AB over other brands.
|Columbia Sportswear is maintaining prices and cutting profit as the weak yen hurts its Japanese business.
|IBM is expected to cut prices today on its best-selling PCs. It will generally lower prices by 10-15%, with some reductions as high as 24%. IBM had already cut prices by 3-38% last month on older, slower-selling models.
|Virgin Mobile USA Inc. matched its rivals with a $50 unlimited wireless calling plan. The Warren, NJ provider's prepaid wireless service cut its "Totally Unlimited" plan by $30 to put it on par with similar plans offered by a number of prepaid players. Virgin Mobile joins a crowded field including Sprint Nextel, Leap Wireless International, and MetroPCS communications.
|Retail price wars start early for Christmas toy sales. Amazon and the individual toy sellers it promotes match Wal-Mart's low prices, but the discounts were offset by shipping charges.
|Teen retailer Abercrombie & Fitch Co. reported a larger than expected fiscal-first-quarter loss Friday and said it would lower prices to boost sales, an about-face from its previous strategy of keeping prices high through the recession. As late as last year, A&F vowed it would not lower prices, despite sharp declines in consumer spending and moves by competitors including American Eagle Outfitters Inc. and Aeropostale Inc. to slash their price tags. Now, it said meaningful reductions in price were required in light of "a headwind where the consumer is reluctant to spend on premium brands." The planned price cuts would be concentrated on its Southern California themed Hollister brand and children's store Abercrombie kids.
|As soon as a 24-hour Rite Aid and a CVS opened on the same block as New London Pharmacy, it started taking 340 prescriptions a day (60 less than usual). "Some of these people had been loyal customers for decades." To gain back customers, the drugstore lowered its prices on its top 200 drugs by 10% or more, even though it meant selling many meds at cost. They now matched the new competition.
|Microsoft will cut prices up to 45% on 10 of its premier home titles, bringing its prices in line with other top home software makers.
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