Reasons for reducing price:

i) Competitive reasons: The firm may decide to reduce its prices as a response to price reduction by competitors.

ii) Excess production: When a company produces in excess of demand, there is the likelihood that prices of the products will be reduced in order to clear the excess products.

iii) Falling brand share: A company may also reduce prices if the brand power is It must reduce the price to be able to exit the market.

iv) Bankruptcy: If a company is nearing bankruptcy, it may be forced to slash its prices in order to increase sales and increase revenue which will facilitate its liquidity status in order to avoid the bankruptcy.

v) Low quality: When the perceived quality of the company’s product reduces as a result of the introduction of a more superior product, it may be forced to reduce its prices.

vi) Seasonal strategy: A company may decide to reduce its prices during certain seasons like Christmas to be able to increase its sales volume and revenue and at the same time reward customers.

vii) Technological Changes: When a competing firm introduces a more technologically advanced product than what the manufacturing company is offering currently, it will have to reduce its prices to be able to sell the obsolete products.

viii) Economic recession: When the economy in which the company is operating declines in terms of disposable income and purchasing power, the company will have to reduce its price in order to encourage consumers to buy.

ix) Drop in raw material prices: When the cost of raw materials used to produce the company’s products reduce, the company may also decide to reduce its prices to retain its customers.                                                                                                   (Any 5)