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 L ow - Co st Com pe ti to r (P art III o f a s er ies ) By Karleen Kos, PSAI Executive Directo r Option: Fight it out. There is a case to be made that direct, retaliatory price cuts should be a last resort because of the damage they can do to the portable sanitation industry overall. Yet it is not realistic to suggest that all price wars can be avoided. We live in a capita list economy. New competitors will want to enter existing markets and they will sometimes, in good faith, believe they can deliver better value at lower prices. Other times existing providers will feel the best option they have for dealing with a compe titor is to fight fire with fire. For instance, when a competitor threatens your core business, a retaliatory price cut can be used to signify your intention to fight long and hard. Likewise, when you can identify a large and growing segment of price - sensi tive customers, when you have a cost advantage, when your pockets are deeper than competitors' pockets, when you can achieve economies of scale by expanding the market, then engaging in price competition may be smart . In those cases, the PSAI urges all Me mbers to be cognizant of avoiding negative consequences for the industry as a whole when low prices also mean compromises that could negatively impact user experience. Option: Retreat. There may be times when it is just best to back away from a price war and focus on other ways to grow your business. Even if it means losing some ground in the short run, it may be less costly in the long run. Develop your business strategy in light of this low - cost competitor. Consider, for example: • Developing sales plan s for winning back customers who are disenchanted with what they get at lower costs from the competitor. • Offering new services ( grease removal, weddings, party equipment rentals, septic pumping, temporary fencing, etc.) the competitor doesn't have. • Speci alizing in niches for which the competitor is ill - suited. Do you have good employee retention that makes it w orthwhile to get your team certified or licensed for other specialty needs – something an upstart or lowball competitor can't do because of his low margins and poor employee retention? In the end, only you can determine the strategy that is best for your company. To do that, don't panic – study the situation and plan your response, leveraging your strengths and minimizing the impact of your firm's weaknesses. Remember to check out the resources the PSAI has in its Members - only resource library for help and be sure to participate in round table discussions with others who have faced the same thing. We are here to help. - KK P AGE 12