Friday, April 12, 2024

Avoid the price wars

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Getting into “price wars” with competitors during the current recession could be the death of some Barbadian companies.

That’s the warning coming from longs-tanding University of the West Indies (UWI) accounts lecturer Dr Donley Carrington.

Carrington, who is coordinator of the MSc investment and wealth management programme at UWI’s Cave Hill Campus, is urging businesses to find creative ways to respond when competitors lower their prices.

He gave the advice last week during a UWI business forum held in partnership with CIBC FirstCairbbean International Bank at The Mount Restaurant.

Speaking on the topic The Strategic Pricing Of Products And Servcies In A Recessionary Environment, Carrington said the pricing objectives Barbadian companies should have in these times included survival, maximising profits and marketshare, while also ensuring product quality leadership.

However, he said getting into price wars with competing companies and products and services would be a mistake.

“Don’t discount your product or service for the sake of competing. Getting into a price war with your competitors – without adjusting the value of the product or service – will just send you and your competition swirling into a downward pricing death spiral where no one wins,” he warned.

Some alternatives he gave included maintaining prices while adding value, increasing prices and quality, and launching “a low price fighter line”.

Carrington also advised companies not to “reduce prices on your high value products and services”, control company costs and reduce inefficiencies, “define the value you offer to your customers”, “use excess capacity wisely”, “know when to say no” to customers, and to be “opportunistic”.

“During a recession keep high-value products priced appropriately, but focus on selling more low-value products and services. Focus on volume with the low value products, and apply an appropriate mark up using a discount grid.

“Streamlining your company’s processes and expenses is good for business in any economy. Reducing prices to generate more sales will not improve your business in the long term,” he said.

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