Smarter Pricing: How to capture more value in your market

Does a price war make sense?

There are three circumstances where it may make sense to launch a price assault:

Reason 1. Customer opportunity – some markets have significant latent demand at lower prices. There may be many consumers willing to buy when prices drop to an affordable trigger level. A company matching this required price wins rapid volume growth. This scale advantage from high market share permits it to progress down the experience curve faster than competitors and thereby gain long-term cost advantage. This is a penetration pricing strategy. In the UK, the introduction of the 1830 Beer Act created a new type of public house. Within six months, nearly 25,000 new beer houses had sprung up. The latent demand for beer led to a price ...