How to Fight a Price War

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How to Fight a Price War Price is one of weapon to ward off competitors. By creating low prices. Cutting price and joined to the battle is a easy and quick action, but it’s give consequences to the company’s profit—decline profit, margin became smaller and smaller. Also diminish consumers’ perception of quality.

Price is one of weapon to ward off competitors.

By creating low prices.

Cutting price and joined to the battle is a easy and quick action, but it’s give consequences to the company’s profit—decline profit, margin became smaller and smaller. Also diminish consumers’ perception of quality.

How to Fight a Price War A good managers will avoid a price war as could as possible. Consider other option—customer service, improvement quality, brand awareness, etc—than starting a price war. Even though managers decide to join the battle they will look and prepare the resource. Good diagnoses involve analyzing four keys areas in the theater of operations.

A good managers will avoid a price war as could as possible.

Consider other option—customer service, improvement quality, brand awareness, etc—than starting a price war.

Even though managers decide to join the battle they will look and prepare the resource.

Good diagnoses involve analyzing four keys areas in the theater of operations.

4 key areas of operation Customers issues Price sensitivity, customer segments that may emerge if price change. Evaluation of customers and their price sensitivities can provide valuable insight about whether should join the battle or consider some other strategy. Some consumers are more sensitive to quality than price, cutting price may diminish costumers’ perception of quality.

Customers issues

Price sensitivity, customer segments that may emerge if price change.

Evaluation of customers and their price sensitivities can provide valuable insight about whether should join the battle or consider some other strategy.

Some consumers are more sensitive to quality than price, cutting price may diminish costumers’ perception of quality.

Cont’d Company issues Business’s cost structures, capabilities, strategic positions. Possible factors to cutting factors. Outsourcing and development of technology could affect to cost of doing business.

Company issues

Business’s cost structures, capabilities, strategic positions.

Possible factors to cutting factors. Outsourcing and development of technology could affect to cost of doing business.

Cont’d Competitors issues Rival’s cost structures, capabilities and strategic positions. Contributor issues Suppliers, distributors, providers of complementary goods and services, government.

Competitors issues

Rival’s cost structures, capabilities and strategic positions.

Contributor issues

Suppliers, distributors, providers of complementary goods and services, government.

Ways to Fight Price War Non Price Responses Example Tactic Form strategic partnerships by offering cooperative or exclusive deals with suppliers, resellers or providers of related services Co-opt-contributors Increase product differentiation by adding features to product, build awareness Compete on quality Offer to match competitors’ prices, reveal your cost advantage Reveal your strategic intentions and capabilities

Ways to Fight Price War ( Cont’d) Price Responses Example Tactic Adjust the product’s regular price in response to competitor’s price change or another potential entry into the market Deploy simple price actions Introduce flanking brands that compete in customer segments that are being challenged by competitors Introduce new products Offer bundled prices, two-part pricing, quantity discounts, price promotions, or loyalty programs for products Use complex price actions

Fight It Out Although we feel strongly that direct, retaliatory price cuts should be a last resort. Impossible to avoid price war in some industry, i.e. PC industry When a competitor threaten your core business, a retaliatory price cut can be used to signify your intention to fight long and hard.

Although we feel strongly that direct, retaliatory price cuts should be a last resort.

Impossible to avoid price war in some industry, i.e. PC industry

When a competitor threaten your core business, a retaliatory price cut can be used to signify your intention to fight long and hard.

Long-run Implications of Joint the Battle A pattern of price cutting may teach customers to anticipate lower prices; more patient customer will defer their purchase until the next price cut. A price cutting company develops a reputation for being low price, and this reputation may diminish of customer perception about image and quality Price cuts have implication for other player in the market, whose self interest maybe harm by lower price

A pattern of price cutting may teach customers to anticipate lower prices; more patient customer will defer their purchase until the next price cut.

A price cutting company develops a reputation for being low price, and this reputation may diminish of customer perception about image and quality

Price cuts have implication for other player in the market, whose self interest maybe harm by lower price

Retreat It Out Develop another core business beside price Consider other option—customer service, improvement quality, brand awareness, innovation, etc—than starting a price war. example; Sara Lee, DuPont, 3M

Develop another core business beside price

Consider other option—customer service, improvement quality, brand awareness, innovation, etc—than starting a price war.

example;

Sara Lee, DuPont, 3M

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