How to fight a price war

Strong competitor is erasing industry margin

[gibbon]

We are a eretailer operating in a very competitive & price sensitive market. At the best of times we run 10% lower than typical high street prices.

However a new competitor has entered the market recently and seems to be buying market share at my expense - undercutting me by very small amounts, but still very irritating!

Indeed I responded by matching all his prices, his reponse was to cut his prices again. Undercutting me by a small amount. We do not want to match price cut for price cut as eventually we will go out of business!

Do any other webmasters here have experience of a similar position? If so what actions have worked for them?

[Shakil]

gibbon,

the only time I got involved was when a # of competitors dropped their price.

I went and INCREASED mine, and came better off.

Price wars are a bad thing for a business.

Shak

[bcc1234]

We do not want to match price cut for price cut as eventually we will go out of business!

Maybe it would make sense to set your priced back to what they used to be, cut down on your advertising and wait for him to go out of business?

[gibbon]

thanks for your advice.

a bit of sanity in the heat of my battle :)

cheers

[Brett_Tabke]

Or, offer something more. If it's a product, then throw in some cheap perks if you can find them. Maybe a coupon on future buys, express shipping, or drop your prices and increase your s&h charges.

The whole idea is you can't match price-vs-price with the competition, but you can give them something more than the competition does. Put something up that gives you a unique selling point over the competition and highlight it.

[Crazy_Fool]

selling at a loss to gain market share is what amazon and many other large companies do. it works to an extent. they could take all your sales from you until you give up - they make no profit while they do it, but once you give up, all profit is theirs.

personally i'd say leave your pricing alone. look at beating them in the SERPS again and again - gain market share by having 2 or 3 sites. squeeze them out.

[lgn]

Don't. Unlike in brick and mortar, you can ignore your competitor with little consequence.

If your competitor is charging less, then they have less money to advertise, and less business.

This competitor is probably thinking, that he/she can establish a customer base, and once they have a sufficient customer base, they can jack up the price. This does not work on the Internet, there is very little customer loyalty.

Many a company went under, on the principle of selling at a zero or negative ROI, to establish branding.

[Tony_Perry]

Brett is spot on. Quite often in business the biggest and most profitable are not the cheapest! customers buy on perceived value so build in cheap extras that are perceived as being valuable and then charge more than your competetor! it's called "added value" and it works!
Tony

[gibbon]

thanks for the advice guys. really appreciated.

however i think one reason why he is undercutting me is BECAUSE we are no 1 in serps for most important key phrases. So as he is much lower down (2nd page) he feels that he has to offer lower pricing!

[digitalghost]

>>he feels that he has to offer lower pricing.

You're already winning the war, he's reacting to you. Keep it that way.

[chiyo]

great thread everyone thanks Even though gibbon says his is a very price senstive area, I feel that there is almost always a way to make the experience of the product more multifaceted. Taking a branding approach is one of those. And pricing itself can be differentiated not only by direct cost, but things like terms, methods, and many of the better ideas already suggested. Many great suggestions here.

[Tony_Perry]

jst one interesting aside. in my previous business i once increased prices by 30% in one go. i lost 10% of my clients but ended up making much more money! also, the 10% i lost were the clients who caused me the most trouble!
Tony

[kevinpate]

What Tony describes:
(price increase + customer loss = > profit) is not uncommon.

NFP's deal with the issue on most any fundraising product they sell, especially if the price was held static for three years or more.

Generally, year one will be lower sales, but higher income, (enough of the target market reacts to the increase to impact sales, but the lower percentage sold doesn't negate the increased income)

In year two, sales volume generally increases over the prior year. So whether or not volume returns to the level of two years prior or not, the income is still more than
in each of the two preceding years.

[rcjordan]

For today's assignment, please review Elastic versus Inelastic demand

Price Elasticity of Demand [quickmba.com]

Heh!

[remoteoffice]

Everyone is right, keep your prices there, and let him go under.
Ignore the price wars, you will be here in 15 yrs.

Beth
<snip>

[edited by: engine at 4:55 pm (utc) on June 23, 2003]
[edit reason] No sigs, thanks. See TOS [webmasterworld.com] [/edit]