By decreasing supply costs, Colgate-Palmolive are be able to spend more money elsewhere in place that more money is needed, or they are able to make the cost of the product lower and more affordable to the consumers. This, in turn, increases competition because people do not want to spend a lot of money on a product like toothpaste. Lowering costs for the consumer could switch some loyalties and confirm others.
http://www.colgate.com/app/Colgate/US/Corp/ContactUs/GMLS/HomePage.cvsp
Lowering costs in the supply is a key strategic move for Colgate. With lower prices on products in a CPG industry that is fairly uniform in its offerings, consumer preference will be established and potentially consumer insistence. In addition, if these consumers opt towards Colgates cheaper product and express preference, Colgate could begin to slowly raise prices as well over time, further increasing its profits.
ReplyDeleteYes, Colgate could raise their prices after gaining customers, but would this dissuade people from buying their products? It probably depends on long Colgate waits to raise their prices. If they do this too quickly, their customers would not have the time to grow product loyalty for these products so they would not have a problem switching to a company that has a similar product for a lower price.
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