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Implementing a new pricing strategy can be very beneficial for an organization or is can have bad consequences. New pricing strategies are usually implemented for a number of reason, but the two most common would be to increase or lower price. Lowering the price can present challenges such as devaluing the product or service, but it is mostly receptive by the customer because they are getting the same product at a lower price. Although, there may be instances where a well like in the case of Fire Fighter Turn Out Bag where lowering the price by swapping materials hurt the company. The company recycles old fire fighter gear, and turns them into various bags. However, the company went down drastically when they started producing a lower cost bag made from printed material. Needless to say the company realized the problem and now continues production of the cheaper bag and the expensive recycled bag.
On the other hand the greatest challenge for organizations implementing a new pricing strategy is customer satisfaction. In the book on page 270, there is a small passage titled “Exploring New Ways to Manage a Price Increase: Lessons from Netflix”. In the text it explains the outrage of customers when the company raised prices of it’s services by up to 60% in June 2011. Over 10,000 customers turn to social media, blogs, letters, and other correspondence in their dissatisfaction, 1 million customers had canceled, and Netflix lost more than half of it’s value within two months. This clearly indicates that the customer dissatisfaction is by far the greatest challenge for organizations implementing a new pricing strategy.
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