There are early warning signs. Because price wars just don’t happen out of the blue. You won’t wake up one early morning, scratch your head and say, “S*%&t, I need to lower my prices!”
If you haven’t been following your competition for those early signals, you’ll miss all signs that a price war is coming! When you see increased advertising, larger booth space or aggressive price promotions, best to ask why these are happening. Take the time to investigate what those mergers and alliances in your industry mean to your business, and why your salespeople can’t close more details.
To help you get a better understanding of your industry and market trends that could affect your pricing, do the following:
- Follow the news
- Track your competition
- List to your customers
- Conduct an annual SWOT analysis
- Stay on top of trends and consumer buying behaviours
How to protect your pricing
There are other options such as marketing strategies, tactics, new product developments and loyalty programs) that your company can do to protect its profit margins. Remember, if you feel you need to match your competitor’s prices, you are contributing to the price war.
Depend on your Marketing department for forward-looking research, early warning signs, and for this team to propose deliberate changes in your company’s position to help remove your company from a price war. Don’t have a marketing department? All you have is one person who creates brochures and updates the website? Hmm, that’s not good.
Don’t Compete On Price
Don’t ever compete on price, people will just think you’re cheap. More importantly, don’t depend on your sales team to dictate pricing. Even when they are complaining, “I can’t make my numbers, the competitor is lowering their prices”! Do not say, “Match them!”
Instead, compete on product or service differentiation. Increase your advertising spend and add more services to your product. There has to be something that makes your company different and why customers buy from you, sell on that!
Be Cash Flow Positive
During a price war, you will win if you’re one of the larger companies that can sustain a price war or you’ll need to be cash heavy.
Track Your Competition and Industry
As I mentioned above, track, analyse, review your competition and your industry. This needs to be an essential program for your company!
Increase Good Will & Press
During a price war, this is the time to increase your brand visibility. Get interviews, promote what makes your brand different and promote why customers choose you!