The effect of price increases on contraceptive sales in Bangladesh

Abstract

In April 1990, the prices of five brands of contraceptives in the Bangladesh social marketing project were increased, by an average of 60%. The impact on condom sales was immediate and severe, with sales for the following 12 months dropping by 46% from the average during the preceding 12 months. The effect on oral contraceptive sales was less dramatic: average sales in the year following the increases dropped slightly despite a previously established pattern of rapidly rising sales. There appears no reasonable combination of events other than the price increase itself to explain most of the difference.

PIP: Given the continuing increases in sales of condoms and pills in the Bangladesh social marketing project, the US Agency for International Development, which funds the project, demanded in April 1990 that the prices of 5 contraceptive brands be increased. Prices were raised by an average of 60%. The volume of condom sales over the next 12 months dropped 46% from the average over the preceding 12 months. The average sales of oral contraceptives, however, declined only slightly albeit during a previously established pattern of rapidly rising sales. Declines in sales volume logically appear to be the direct result of product price increases. Sections discuss project background and the setting in Bangladesh. The authors conclude that when price increases are made on commodities in such social marketing programs, they must be imposed gradually and cautiously, in keeping with inflation, and with consideration of the actual buying power of intended beneficiaries. The different reactions to price changes of 2 different pill brands also prompted a note on the potential importance of market segmentation.