Any company must devise a pricing strategy and change it over time in order to be competitive and make a profit. Thanks to successful pricing policy, P&G holds a leading position in many market segments. The purpose of this essay is to consider Procter & Gamble’s pricing strategies after the Great Recession of 2007-2009 and explain why the company had different pricing strategies in 2009 and 2010.
Procter and Gamble Co. (P&G) has managed to occupy all the niches of the consumer market due to the high diversification of the business; in fact, the company does not have a specialized market, and accordingly, it does not depend on market conditions. The use of different pricing strategies and a successful marketing campaign saved P&G from significant losses in the period of the Great Recession when consumer demand deteriorated sharply because of the difficult economic situation. As part of the anti-crisis strategy, in 2009, the corporation had to raise product prices to keep profits from falling. According to Byron (2009), it resulted in a 7% sales decrease in total sales of the company. Moreover, in the third quarter of 2009, the net income of the corporation was 3.6% lower than a year ago at the same time (Byron, 2009). First of all, people bought fewer products because the price went up. The availability of substitutes also affected demand elasticity of the company’s products – people could replace P&G’s products by goods of other companies offering the same categories of products at a lower price. Accordingly, demand was elastic because the quantity was sensitive to a change in the price of the P&G’s products.
In 2010, the company decided to change its pricing policy in order to be competitive on the market. The company lowered prices for most of its products, increased sales, and paid increased attention to its advertising campaign. It was done to regain market share lost after the 2009 price campaign. The owner of the brand hoped to stop the outflow of customers. As a result, the strategy of price reduction allowed to increase sales growth by 7% compared to last year (Byron, 2010). In this case, demand was also elastic because a change in price impacted the quantity that happened because of availability of substitute goods and reduction of the cost.
References
Byron E. (2009). P&G, Colgate hits by consumer thrift- household products makers see sales weakening, raise prices to keep quarterly profits from plunging. Wall Street Journal. Web.
Byron E. (2010). P&G puts up its dukes over pricing-consumer-products makers risk margins to grab market share from rivals and cheap store brands. Wall Street Journal. Web.