Buyer Reactions to Price Changes

Whether the price is or lowered or raised, the action will influence competitors, buyers distributors, and suppliers and can interest government as well. Customers do not always interpret prices in a simple way. They can view a price cut in different ways. For instance, what would you think if a company unexpectedly cuts its VCR prices in half? You may think that these VCRs are regarding to be replaced by newer models or that they have some error and are not selling well. You may think that company is abandoning the VCR business and cannot stay in this business long sufficient to supply future parts. You may believe that quality has been reduced. Or you may think that the price will come down even further and that it shall pay to wait and see.

In the similar manner, a price increase, which would in general lower sales, can have some positive meanings for buyers. What would you think if company indicated above raised the price of its latest VCR model? On the one hand, you may think that the item is very "hot" and can be unobtainable unless you purchase it soon. Or you may think that the VCR is an strangely good value.