Smarter Pricing: How to capture more value in your market

Any advantage is short-lived

Joel Urbany (2001) investigated managers’ beliefs that buying market share through aggressive short-term pricing leads to permanent increases in profitability. His findings were that price cuts were quickly matched. Any gain in share is short-lived and industry profits may end up falling.

If there is success in attracting new customers through price alone, competitors will simply follow and neutralize the gains. In the US mutual fund companies the three biggest players are Vanguard Group, Capital Group and Fidelity Investments. Vanguard has long trumpeted its advantage in low-fee investing. In August 2004, Fidelity responded by cutting fees on five of its index funds. A month later, Capital Group followed by announcing ...