Remember this old post where we had written about The right price for your products?
Taking it forward from there, we would like to bring to you this post from HBR.
We discussed, and what follows was the quick post one of us wrote, and in fact insisted upon over email.
Haha..simple, pricing objective needs to be clear….it is not just about one season profit.
Also if we are assuming that the shopkeeper will gather inventory before the start of winter, then why won’t the consumers do the necessary preparation for the season and buy shovels and other necessities?
….now, there could be some lazy bones like me who will start digging a well when they are thirsty…also, there could be some instance where shovels will break…now, if a shopkeeper wants to squeeze money from those cases in point, it is absolutely fine, if the pricing objective is being met.
i.e if my business (my shop’s sales) is unpredictable and I am not sure about sustainability till/ during next season, and I am really in a cash crunch situation, I would milk the cow by increasing the price……think if I don’t have this unpredictable cash crunch situation, but I increase the price, what will happen if rest of the season (even next year season) is normal winter – I will lose customer loyalty………………………………..
NOW, OF COURSE if it is not about me, but we all lobby and increase the price at once (and there is not a game theory defaulter), enjoy the profits (you may never enjoy this in future, as consumers would be extra cautious (prepared in advance) from next time onward – But not all; humans are humans)