Issue link: http://psai.uberflip.com/i/1169394
WEEKLY EDITION SEPTEMBER 18, 2019 So You' re i n a Pr ice Wa r: N ow W hat ? (Part II of a series) By Karleen Kos, PSAI Executive Director Both a new competitor and a current one will be underpricing you because they think it will advance their self- interest. If your research has given you insight into their company's back end, then you also can calculate what their tradeoffs might be. In the short run, the small-time weekend operator trying to get a toehold might be able to undersell you on a few low-volume jobs. You can thrive in bigger jobs and wait it out. Sooner or later the real costs will catch up with the weekender and they'll either have to raise prices or sell. The larger regional or national firm probably has more resources than you, and they might be able to absorb losses for a long time. That's frustrating, but it isn't illegal. True, it doesn't do the whole industry any good, but focusing on that won't save your company. Look at what the weaknesses in a large, more impersonal operation are. Then develop your response. Another angle is to look at how to leverage relationships in your market. A current competitor has a history of relationships and a reputation for better or worse; a new entrant has none. How can you leverage your own company's reputation as compared to theirs in a price war? Contributor issues. You may feel all alone in this, but there are other players in the situation whose self-interest or profiles may affect the outcome of a price war. This can include suppliers, service providers, and local governments, among others. Does anyone in your business world have something to gain or lose if one portable sanitation company "wins" and the other "loses" a price war? Think about how these other entities can be part of the solution for you. For example, in one southern market, a PSAI Member has been successful in getting the city bidding process to include disclosure about whether the firm is a PSAI Member and whether they use PSAI-certified employees. This not only assures the city that the firms who bid know what they are doing, it levels the playing field in several key respects. In another case, a company owner heard that a certain supplier was giving his competitor a better deal on product purchases, even though the owner had been a longtime customer. Obviously, it is in the supplier's best interest for both firms to succeed, so the owner's friendly talk with the supplier helped address a small part of the operating cost disparity. Decision makers in portable sanitation companies who take the time to carefully review the four areas above often discover many ideas and options that they can consider. Knowing what you are trying to do, and making decisions based on a cohesive strategy, will help you keep your head as things unfold. Next week: Specific Strategies for Dealing with the Low-Cost Leader - KK PAGE 13