Most competitors are offering low prices after a period where leaders held prices high
Symptom: Until recently, competitors were reluctant to match discounts in what turned out to be a failed attempt to maintain profits. This was especially true of some of the largest competitors, who believed that they had the most margin to lose.
Implications for the market:
Failure to match discounts led to erosion of market share and, with it, profitability. Competitors have learned a painful lesson and are now defending market share by matching all discounts.
Today, discounting is moving little share, but it is destroying profits for everyone.
In the future, low price will not be the basis of a winning strategy. Once a market has reached a state of hostility, price moves little share.
Some discounters still exist. These are companies that consistently price 2 to 5 percent below the market. They do not gain share with this discount because they offer a lower benefit package.
For all other competitors, price becomes commoditized, and low price does not distinguish winners because all competitors will match a price that would move share.
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Perspectives: Conclusions we have reached as a result of our long-term study and observations.