Deciding to increase the price? Think Customer-first policy1. Caution was the advice given in the article before increasing-price during inflation. Why?2. Enumerate the techniques identified to reduce cost and thus avoid price increases during periods of inflation. What do you think is the most convenient? Why?3. Among the steps to take before increasing-price which is the most difficult? Why? This site was designed with the WIX.com website builder. Create your website today.Start NowDeciang to increase the price: Think Customer-first policyInflation is the most prominent economic news of 2022. Fueled by a menagerie ofstampeding uncontrollable factors, including supply chain problems and a record-breakingprice hike on petroleum, geopolitical stability saw inflation shooting to the stratosphere.Experts believe the rising cost is a temporary phase at the end of 2021. Now, it is clear thatthe specter of inflation will continue to stalk both consumers and businesses at the end of2022. Fortunately, the Bangko Sentral ng Pilipinas (BSP) has buttons and levers to push andpull to control inflation. Three weeks ago, the BSP increased the interest rates to stabilizeprices. S&P forecasted that the inflation rate in the country would exceed the targeted 2percent.While that is fresh news for experts, the situation cast a long shadow on SMES, especiallywithout the stamina of large corporations. Big businesses can pass on the cost to consumersand be confident that they understand. Several companies such as P&G, URC, and GeneralMills have taken this approach. An SME fearing a dash of their customers out may decideagainst price hikes. But carrying the inflationary cost may push the business to the edge,reduce the operational cost, or force it to take shortcutsWhen is the right time to increase the price, and how to do it for the customers tounderstand?Before deciding to increase the price, it is essential to consider how cost can affect therelationship of the business with core customers.The standard technique is to increase the price equal to the increase of the new productioncost. It is hindsight to protect profit without taking advantage of the situation by realizing amore significant profit. However, it is wrong to assume that customers will swallow thedangled price hook, sink, and barrel. They, too, are juggling with the decision of how muchand where they are going to spend itMore than that, customers' long-term memory will have kicked in if the prices were too high.Whether the business decides to revert to the original price takes a colossal effort to changecustomers' perceptions.Hence, gathering information on the socioeconomic data of your core customer help in thepricing strategy. Try to determine the customer's average income, consumption pattern, andbudgeting. Also, focusing on the competitors and determining the cross elasticity of relatedproducts help in pricing and targeting the market.However, if push comes to shove and a price increase is still likely, proceed with caution.There are several ways to mitigate the rising cost without increasing the price. The businessmay limit the discount percentages and promotions, reducing the holding cost in theinventory reduces the fixed cost; a substitutable raw material may not necessarily harm thequality of the product. There are always ways to reduce total costs without affectingcustomers.In introducing new prices, the business may start with more inelastic products. For instance,customers may look for a substitute if the price increase of their favorite coffee is more thanP20 but are willing to add P2 for the coffee creamer without noticing.Moreover, in deciding to introduce a new price note, the followingInformation is critical. Announce to customers all the reasons for the planned increase,including the new price. Offer a substitute for customers who cannot afford the new price.Thus an alternative is better than the customer looking and buying from competitors. Gatherdata to assist in the pricing strategy and a faster reaction in the future.Finally, the unique circumstance of the business shapes decisions, including the targetcustomer, product, and market. Regardless of the decision, know that customer comes first,and inflation is a mere passing economic situation.

A customer-first approach is a business strategy that puts customers first in all it does. This…

Answered: Deciding to increase the price? Think…

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC