Evaluate how effective a price discount will be in raising revenues during a recession

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Do you think your company will benefit by giving a price discount during a recession? In order to analyze that, let us first understand what recession is. A recession is an economic downturn of at least six months. It can drastically affect the demand for goods in the market, resulting in firms either shutting down or reducing costs to survive. Firms start reducing cost by cutting down on labor. The consumers will then tend to spend less; the unemployed will cling onto their savings, and the employed, anxious about their job will follow suit. So the economy will slow down. These are hard times for a company to sell their goods. Which brings us to our initial question, under such an economic condition, will the company benefit by giving a price discount on their goods. Let’s evaluate this probable solution. It’s quite natural that the frugal consumers, when provided discounts, will buy your product and you might increase your sales and market share. But will it prove beneficial in the long run? It might and might not. It might, depending on your brand position. Is your product all about being cheap? And are you willing to continue with that brand position far beyond the recession? For example, Wal-Mart, can afford to offer price discounts during a recession, since it’s in accordance with their brand promise. A low price strategy is easy to adopt, but extremely difficult to dismiss when the economy picks up again. For example, Dell a low price leader in the PC market, was well received by cash-strapped corporations and consumers during an earlier recession. But as soon as the economy recovered, there was demand for more sophisticated products, and Apple was there waiting for them. Apple then enjoyed a humungous growth, both in profits and their stock price, which gave it the cash to diversify into other areas, such as the iPhone. Dell might still sell more computers

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