Maxwell House Coffee introduced a second, low-priced brand into their own dominant eastern United States markets during the 1970s to slow and confuse the introduction of Folger's Coffee into their markets. This new product was packaged and designed to resemble Folger's familiar red can, with pricing set below Folger's Coffee. The new temporary product clogged grocer shelves and made it more difficult and expensive for Folger's to introduce their coffee into new eastern markets. If you have a premium-quality product, with premium packaging, graphics, and unique features and benefits, perhaps a premium price is necessary to reinforce the premium brand image. Higher margins than normal may be one benefit.
High prices confirm perceptions of high value in consumer minds.
A good pricing strategy will also indicate guidelines for action in the case of price increases or decreases. We will increase prices to follow a share leader price increase, but only to preserve margin objectives. Strategically, you may want to consider temporarily delaying necessary price increases driven by supplier and ingredient price increases. Take affordable, smaller profit margins if your category segment is price elastic. If competitors are increasing prices and your company decides not to, this could be a temporary advantage for your company since sales volume may increase.