Price Wars - Don't Strike Back

Posted by Moira McCormick on September 28, 2016
Moira McCormick


Your competitors may all be falling over one another to get a piece of the market - and discounting heavily to make sure they win their share of that market. However, you are really not compelled to join in; better in this instance to stay neutral in the conflict and let the others fight it out.

Does this sound too risky a strategy? No, just sound advice for the long haul.

Believe me, it's never good news when a price war develops - even if initially it brings over to your side a whole batallion of price-sensitive customers. The truth of the matter is that these customers will not stay loyal when the price returns to the previous level. You may have won the battle but not the war.

So, what other strategy is there when your competitors are undercutting each other right, left and centre - and you are getting nervous and wanting to join the melee?

Well, it's all about selling your value and superior service.

All too often our default setting seems to be to offer a price cut if the opposition (sorry, customer) gets stroppy about a price. You forget that selling value is always long-term.


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Why is value so important?

Well, there are 3 types of buyers:

  1. Price Buyers
  2. Value Buyers
  3. Partners

Approximately 60% of buyers are typically Price Buyers, who are mainly concerned with getting the best deal and seeking the biggest discount. Remember, they are only looking for the cheapest price, they will defect when prices rise again.

If you can communicate the value of your product or service to these Price Buyers (Type 1), you can subtly move them into a higher category (Type 2 or 3). Once you do this, the focus is no longer all about price, but how you can benefit your customers, make their lives easier or save them time.

If you offer excellent customer service/support and a simple, no questions asked returns policy then these customers are more likely to remain loyal.

Value-based selling should be the foundation of all of your sales efforts.

Establishing the value of your items puts your salespeople on a strong footing - and educating your customers about that value makes it possible to avoid the discounts/promotions that eat into margins.

In the long term, making everything all about price devalues your products. When you end your promotion or other discount and try to return the products to their original prices, customers will see it as a markup - and the rebellion starts.

If however you are selling on value, the price of an item becomes secondary to what the product can provide for your customers.



With value, it is easier to justify and defend a higher price. A higher price means you are happy because you have grown the profitability of that sale. However, the best part is that the customer is also happy, because they are clearly aware of the amazing value you're bringing them.

The next time you're in the middle of a price battlefield, face to face with a buyer who is challenging your prices because they can get a better deal down the road, don't immediately push the button on a discount.

Instead turn the discussion to articulating the value you will bring and stand by your price. Don't join the enemy, stick with your own guns. You will be favourably surprised by the results.


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Why Should We Care About Value 

10 Steps to Selling Value 

Memo to CEO:Price War? Let's not join in, by Alastair Dryburgh 

The Strategy and Tactics of Pricing, Tom Nagle and John Hogan 2016

Confessions of the Pricing Man:how price affects everything, Hermann Simon 2015

Pricing with Confidence:10 ways to stop leaving money on the table, Reed K. Holden and Mark Burton 2014

Value-based Pricing: drive sales and boost your bottom line by creating, communicating and capturing customer value, Harry Macdivitt and Mike Wilkinson 2011

Topics: Price War, Value-based Pricing, Buyers

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