Customers are more price sensitive

Symptom: Customers have become more sensitive to overall differences in prices.

Implications for the market:

  • In the stage immediately preceding hostility, real prices usually fall and service levels improve as customers look more critically at what suppliers are offering.

  • At the same time, customers become more willing to switch suppliers. This is because, as price competition picks up and service innovations among competitors proliferate, customers find that their choices have increased and become more distinct. They have more reasons to consider switching.

  • Once customers become less entrenched and begin to shop actively, they are more easily moved on the basis of price or marginal service features. From now on, smaller differences in price or service levels will cause customers to change suppliers.

Recommended Reading
For a greater overall perspective on this subject, we recommend the following related items:


Perspectives: Conclusions we have reached as a result of our long-term study and observations.

  • "Is Your Industry Ripe for Hostility?"
    A company enjoying above average margins probably has a competitive advantage. But if margins are high for an entire industry, tough times may lie ahead.

  • "The New Pricing Structure"
    The structures of industry prices are fundamentally different in hostile and non-hostile markets.

  • "The Price Segment"
    The price segment is not nearly as attractive as many assume.

  • "Who Has Pricing Power?"
    One of the first clear signs that a market has become hostile (or that hostility has ended) is a change in who sets prices. Pricing power shifts as a market moves into and through hostility.