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Competitive Price Pressures? How to React and Why.

August 2014 Pricing 2 Comments

In free markets, competition is the norm, not the exception, and that competition will limit your latitude for pricing. When competitors lower prices or new competition enters at a lower price, many a novice manager’s gut reaction is to lower prices—but the cost of price concessions may be higher than the cost of customer losses. Experience will temper these beginner instincts over time, but there must be easier and less costly ways to identify the proper reaction to competitive price moves… Enter the Strategic Pricing Reaction Matrix.

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“If you know the enemy and know yourself, you need not fear the result of a hundred battles.” –Sun Tzu, The Art of War

  1. In every competition you face, you will have advantages over your competitors, and you will have disadvantages.
  2. If that isn’t the case, it really isn’t much of a competition.
  3. Every market is different, and presents different competitive challenges.
  4. Surviving a competitive market requires predicting what your competition will do, knowing what your customers value, and reacting and proceeding accordingly.
  5. Expect that your customers will act more predictably than your competition.
  6. If that isn’t the case, it’s time to reexamine your message…or whether it’s reaching your target audience.