Briefly describe how economic conditions impact a firm's pricing strategies

What will be an ideal response?

Economic conditions can have a strong impact on a firm's pricing strategies. Economic factors such as a boom or recession, inflation, and interest rates affect pricing decisions because they affect consumer spending, consumer perceptions of the product's price and value, and the company's costs of producing and selling a product.
In the aftermath of the recent Great Recession of 2008 to 2009, many consumers have rethought the price-value equation. They have tightened their belts and become more value conscious. Consumers will likely continue their thriftier ways well beyond any economic recovery. As a result, many marketers have increased their emphasis on value-for-the-money pricing strategies.
The most obvious response to the new economic realities is to cut prices and offer discounts. Thousands of companies have done just that. Lower prices make products more affordable and help spur short-term sales. However, such price cuts can have undesirable long-term consequences. Lower prices mean lower margins. Deep discounts may cheapen a brand in consumers' eyes. And once a company cuts prices, it is difficult to raise them again when the economy recovers.