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.

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.

  • "Discovering Hidden Pricing Power"
    A company's effective use of the pricing tool in a price-sensitive market requires more flexibility and market knowledge than is needed in a less hostile environment. The pathways to the pricing opportunities in tough markets lay in three actions a management can take to use price effectively in a market that appears intolerant of price increases.

  • "How Price Kills Profits"
    Many people use their costs to determine their prices. But customers don't care about a company's costs. By thinking more like customers when pricing products, a company might increase its profits.

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

  • "Why Price Cuts Don't Build Share"
    Customers often say they buy on price. But the real buying process is more complicated. Price is not the customer's first consideration. It is his last.