Witness the great price battle of 1999 in the long-distance phone industry: after the dust cleared, AT T, MCI, and Sprint all saw their stock prices dip by as much.
Emphasize your products quality, for example, or superior service.
The Ritz avoided damaging its reputation and earned an 18 gross operating profit.On the one hand, the Web offers an easy way to search and compare prices.Northwest also employed several other resources, such as travel agents, to fend off Sun Country.They project how competitors will set prices by carefully tracking historical patterns, understanding which events have triggered price changes in the past, and by tracking the timing and magnitude of price responses.Our goal is to describe an arsenal of weapons other than price cuts that managers who are engaged in or contemplating a price war may also want to consider.AH successfully fought a price war on home turf between 20espite the fact that its leading competitors had a cost advantage.It would generally be unwise for bricks-and-mortar retailers to try to compete on price given the relatively high cost of maintaining a storefront.Similarly, when you can identify a large and growing segment of price-sensitive customers, when you have a cost advantage, when your pockets are deeper than competitors pockets, when you can achieve economies of scale by expanding the market, or when a rival can be neutralized.Its books once costs thousands of dollars; Britannica now offers free access to its database on the Web and derives its revenues from banner ads, not consumers.A version of this article appeared in the MarchApril 2000 issue of Harvard Business Review).Second, he called local customers and asked them for their support, pointing out that if the smaller supplier was driven off the market, its customers would be facing a monopolist.The story of Dutch grocery chain Albert Heijn (AH) illustrates the point.Rather than engage in a systemwide price cut, Northwest retained its existing fare structure with minor modifications.On-line vendors dont have to maintain a physical presence close to their customers, so they can operate out of a few large warehouses, thus lowering their costs.E-Trade and other electronic brokers are changing the competitive terrain of financial services with their extraordinarily low-priced brokerage services.Given the size of the market for carbonated soft drinks, NutraSweets brand equity in the diet-conscious segment, and the potential short-term loss in market share and profits, this threat had teeth.3M and DuPont are both companies that focus on developing innovations as part of their core strategyand both have proved willing to cede share rather than participate in an unprofitable price war.To survive a price war unscathed, you need weapons other than price cuts.But many unprofitable price wars happen because a company sees an opportunity to increase market share or profits through lower prices, while ignoring the fact that competitors will respond.