A manager notes that a competitor has just launched a major price promotion. The manager's brand has strong brand equity and is perceived as higher quality. What is the most strategically sound response, according to the principles in the textbook?

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When a competitor launches a major price promotion and your brand has strong equity and is perceived as higher quality, the most strategically sound response is to avoid a price war and instead reinforce the brand’s value through non-price strategies. 
Option 1: 'Don’t compete on price and increase advertising to reinforce the brand's quality and value.' This aligns with leveraging brand equity and signaling long-term value to customers, emphasizing quality, differentiation, and the non-price benefits of the brand. It helps preserve margins and avoids eroding brand perception with repeated price cuts. 
Option 2: 'Launch a new product to compete directly with the competitor.' Introducing a new product as a direct price- or feature-based counter-move often distracts from the core value of the existing brand and can dilute focus, increasing costs without guaranteed impact on the price-sensitive share gained from a simple promotion. It may not address the core consumer perception that the brand already carries high quality and value without needing a new SKU. 
Option 3: 'Ignore the competitor's promotion completely.' This could miss an important market signal and risk losing mindshare or sales if customers immediately switch to the lower-priced alternative, especially in price-sensitive segments. It also forfeits the opportunity to reinforce the brand consistent with its value proposition. 
Option 4: 'Immediately match the competitor's price cut to avoid losing any sales.' Matching price cuts can trigger a price war, eroding margins, and can devalue the perceived premium position of a higher-quality brand. It contradicts a strategy built on quality and value rather than price competition. 
Option 5: 'Pull all advertising and shift the entire budget to an even deeper price promotion.' This moves decisively toward price-based competition, undermining brand equity and potentially triggering a long-term degradation of price expectations and perceived quality. 
Across these choices, the prudent path emphasizes protecting brand strength and value signals rather than engaging in short-term price cutting, which is why option 1 is the strategically sound choice.

MARK5560 (L1) Final Exam

A manager notes that a competitor has just launched a major price promotion. The manager's brand has strong brand equity and is perceived as higher quality. What is the most strategically sound response, according to the principles in the textbook?

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