Basics of Marketing - Kotler Philip

The reaction of competitors to price changes

The firm planning to change the price should think about the reaction not only of buyers, but also of competitors. Most likely competitors will react in cases where the number of sellers is small their goods are similar to each other, and buyers are well informed.

How can a firm foresee the most likely reactions of competitors? Suppose she has one major competitor who responds to price changes always in the same way. In this case, the reciprocal course of the competitor can be foreseen. Or maybe the competitor perceives any change in prices as a new challenge to himself and reacts depending on his immediate interests. In this case, the firm will need to find out its immediate interests, such as increasing sales or stimulating demand. If there are several competitors, the firm needs to anticipate the most likely reaction of each of them. All competitors can behave either in the same way or in different ways, as they differ sharply from each other in terms of their size, indicators of market share or political attitudes. If some of them respond to the price change in the same way, there is every reason to expect that others will do the same.