Smarter Pricing: How to capture more value in your market

Be creative and selective in your responses

Companies can try to defuse price competition by smart price responses. Challenged by a price-cutting competitor, a brand might pre-empt the price war by offering a stock-loading promotion to large customers. This brings forward future orders and customers are therefore not in the market when the rival slashes prices. The price cut fails to deliver the expected volume uptake and the competitor learns a lesson about the non-viability of price wars.

If it is impossible for a company to escape a price war, it should limit its responses to the channel, region or segment where competition is most threatening. Tesco, the UK retailer, focuses price cuts on products that tend to be bought primarily by price-sensitive ...