Pricing is the key to a firm's profitability in the short and long term. Many markets are not price sensitive and price is only one dimension of value so the concept of creating superior value lies at the heart of the offering, and not the price. Low prices rarely provide a basis for sustainable competitive advantage.
How to change prices To change prices once the product has been established is a very important strategic decision as inevitably the brand loses market share through consumer resistance to the price increase. The main determinants of price changes are:
How to obtain higher prices: Many firms reduce prices since the experience curve, increasing competition and rising customer price sensitivity stimulates such actions. The other side of the coin is that inflation, stock market expectations for growing profits and the difficulty of finding enough products to replace established ones creates pressure to increase margins.