Pricing Strategy Price Reduction Strategy

What are the implications for revenue and profits of implementing the price cut?

The implications for revenue and profits are dependent on the demands and supply of the product. If there is not enough demand for the product, a reduction in the price of the product by 10% is unlikely to boost the demand of the product. On the other hand, if there is sufficient demand of the product, a 10% reduction in the price of the product will have direct effect on the revenue and profits of the company. The reasoning behind is that the price elasticity of the product is 2.5%, higher than 1. Therefore, a reduction of 10% in the price will have about 2.5 times effect in the demand of the product. As far as meeting the target by the marketing managers, the managers would find it easier to meet its revenue, as...

Competitor set prices based on the market demands. However, the competitors can also set price through price comparison. If the demand of the product is high, the…