1. Never get involved in a price war in Asia*.  Or anywhere else.

• A price war usually has several losers, and no winners.

• In theory, it works if you can take out a competitor.  In practice, even then you may never re-gain the costs of the war, because customer price expectations will be set lower.

 

2. Think of pricing as a secondary competitive lever, not a primary one

 

• This does not mean that pricing is low in its impact on profit – it can have a strong and immediate effect.

• But it is better to win by delivering what the customer wants, rather than by making it cheap.

• When you use price, use it intelligently.  Use aspects of price that the customer values (or ignores), or focus on most (or least) price sensitive customers, rather than discounting (or increasing) prices to all.

• Sometimes you can find a breakthrough approach as part of a well thought through proposition.  e.g. where a lower or simpler price unlocks a lot of volume, or a proposition that meets a deep-seated need enables a higher price.

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3. Customers will always say your price is too high.  So will your sales people.

 

• Market research on pricing is difficult.

• Use observation or experiment to determine price sensitivity where you can.

 

4. Pricing is not static.  Keep learning and adjusting.

 

• The best pricing strategy includes a continuous cycle of review and adjustment.

Copyright Red Kite Management Consulting 2018.  

Not to be used without permission and attribution, please ask us first.

* Original quote: “You fell victim to one of the classic blunders! The most famous of which is ‘never get involved in a land war in Asia’ “, Vizzini, The Princess Bride (See video at 1:30)