Imagine two competitors: A and B
Competitor A knows the willingness-to-pay of its consumers for the products (Optimum price at R$15 for the product and competitor’s one with optimum price at R$12).
Competitor B does not know this information and simply follows Competitor A's prices with a 15% discount.
Product costs have increased by 10% and this seems like a good opportunity for A to increase its current price (R$13) by 15% to R$14.95 just before the price level of a sharp drop in demand.
Competitor B with the original price of R$11.00 decides that it will repeat the percentage increase of its rival A and raise its price to R$12.65.
But...
What follows is a sudden drop in sales, leaving competitor B confused. They can't understand why their rival, after increasing prices by 15%, is selling more, while they, after doing the same, experienced a significant decline in sales—much worse than the 15% price increase.
Below are some mistakes and doubts from competitor B:
Qu: What should you do with a drop in sales?
a) Cancel the price increase and accept the 10% cost increase
b) Reduce the price increase to 10%, maintaining the original margin and creating a price difference with competitor A of 20%, violating the 15% index in force for many years.
c) Do nothing in the expectation that sales will recover subsequently?
Leave your answer in the comments!
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