Issue link: http://psai.uberflip.com/i/1171504
W EEKLY EDITION SEPTEMBER 25, 2019 Pri ce W ar s: Tact ics for Competi ng Aga i nst a Low - Co st Com pe ti to r (P art III o f a s er ies ) … continued from page 2 By Karleen Kos, PSAI Executive Directo r • Know Your Margins and Tolerance for Loss. A price match guarantee has its merits, at least in theory. Quite often it will serve as a deterrent to competitors who seem to want to race to the bottom, especially if you signal that you intend to use this approach to hang on to your customers for as long as it takes. If you have the nerves for it and can tolerate a short - term cash flow reduction until your competitor "gets the memo," a price matching promise can be a powe rful tactic. It can also be powerful as a standard policy, because it signals to future competitors that competing on price is not going to achieve much in your market. This strategy will not be a good fit for your company if you are already in a low marg in, tight cash situation. If you don't have the ability to ride things out for a few weeks or months – or if you know your competitor is notorious for lowballing until they drive smaller companies out of the market – then it probably isn't the right approa ch for you. • Make sure you differentiate your products and services. If you go with a price match policy, ensure you also have a tiebreaker in place. Simply matching the price of a competitor means you're on a level playing field with them. Why should the customer choose you over them? Be able to articulate value - adds like offering the newest equipment, providing 24/7 customer support, being a local/family - owned firm, or some future benefit. Find something that works for your business and market it alongsi de your price match policy. • Limit the Scope. When you create and communicate your price match policy, clearly define the parameters and rules. Limiting the scope will help you avoid getting burned. Common restrictions include identical products/services/r ental time periods only, competitor's prices must be documented on a proposed rental agreement (that is, you will not match on the basis of the customer merely stating, "XYZ company says they'll give it to me for half what you're quoting"), other discounts don't apply, additional charges for geographically distant locations, limited - time promotions, and more. Check out the fine print on large national firms' price matching policies – Wal - Mart, Target, Home Depot, Lowes, and many others offer them. Study the language they use to get a better idea for how you want to shape yours. P AGE 9 CONTINUED ON PAGE 10