(a) Reasons for reducing prices.

(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 declining. 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.

(b) Strategies for retaining Customers

(i) Maintaining quality standards: A company can retain its customers by maintaining the perceived quality standards of its products or services.

(ii) Improved customer care: A company can also retain its customers if proper customer care strategies are put in place by treating customers well to keep them satisfied.

(iii) Accept complaints: The company must also view customer complaints as a gift and put in place strategies solve the problems of dissatisfied customers in order to prevent them from switching to competing brands.

(iv) Improving communications: A company can also retain its customers by implementing modern communication technologies like blogs that will establish a constant link between the company and its customers.

(v) Improving service delivery: The company can also retain its customers by using automation tools that will improve service delivery processes to customers.

(vi) Feedback systems: The company can also use feedback systems to trend customer responses periodically in order to determine which areas of service delivery have improved and which areas have suffered and will require improvement.

(vii) Price cuts: A company can also retain its customers by periodically reducing its prices and offering loyalty packages to demonstrate to customers how valuable they are.

(viii) Non-conventional services: The company can retain its customers by sending them greeting cards, anniversary messages, invitation to special events and also offering complementary products and services to customers.

(ix) Prompt after sales services: By providing prompt after sales services to customers, the company will win their loyalty and so retain them.