When a competitor cuts its price, a company should ________ if it believes it will not lose much market share or would lose too much profit by cutting its own prices.
A) reduce its production costs
B) reduce its marketing costs
C) maintain its current prices and profit margin
D) increase its marketing budget to raise the perceived value of the product
E) increase its production costs to improve the quality of the product

Question

Quizplus · Accepted Answer

If a company believes that it will not lose much market share or would lose too much profit by cutting its own prices, it should maintain its current prices and profit margin. This is because reducing production costs or marketing costs may not be enough to match the competitor's price, and increasing marketing budget or production costs may not be feasible or necessary. Instead, the company should focus on providing value to its customers through factors such as quality, service, and brand reputation. By maintaining its prices and profit margin, the company can also signal to its customers and competitors that it is confident in the value of its product and its ability to compete.

When a Competitor Cuts Its Price, a Company Should ________