Slipping into the downward price spiral

Last week’s Marketing magazine had an interesting article about the “cut-throat world of contact lenses”. Apparently Specsavers have repeatedly targeted Boots pricing, quoting the savings that customers can achieve by switching to them.
Now Specsavers have been targeted by a company called Get Lenses offering even greater savings and Specsavers are quoted to be “very upset” and threatening legal action.
The big problem with using price as a lead marketing tool is that it’s a one-way street. Anyone can drop the price, but hardly anyone ever manages to get it back up again.
People buy on price when they perceive no significant difference – if you promote on price then you risk your customers deciding there is no difference and becoming vulnerable to your competitors when they decide to cut even lower than you.
In the end, margins dwindle to zero (or worse!), and ultimately even the customer (who was initially delighted with their savings) loses out because no suppliers want to invest in product or service development in a low margin market.
If you’re tempted to undercut your rivals to win some quick business, think carefully – where will it lead? Is there an opportunity to differentiate your product or service and offer more for the same or even a higher price instead?
Slip into the downward pricing spiral for a quick sales hike and you could quickly commoditise your market and damage your long term profits.