Businesses must strategize to compete with online prices
By JOYCE M. ROSENBERG
AP Business Writer
NEW YORK — Business owners whose online competitors charge less — sometimes, dramatically less — need to strategize to make sure they survive.
Anyone running a business is likely to be involved in a price war at some time, says Mark Bergen, a marketing professor at the University of Minnesota’s Carlson School of Management. So owners need to be ready to convince customers that paying more for their merchandise or services will be worth it.
“Try to reframe the price war. Have them think less of the money — get them to think of the losses they’ll have if they won’t work with you,” Bergen says.
That might need an actual conversation. For example, if a customer says, “I can get this for less,” then an owner needs to explain the value behind the product or service.
“Shift from a price war to an experience war, a selection war, a quality war, a service war,” Bergen says.
The way a business is set up can help tell its story. Retailers who operate physical locations can offer their customers an emotional experience they can’t get online or at a national chain. Bridal salon owner Ann Campeau points out that her stores in California and Arizona are places where brides-to-be can make an occasion of finding The Dress.
If a customer balks at a price for a service, an owner needs to list all the extras that are available at a smaller provider. Among them: the ability to form an ongoing relationship that a customer can depend on.
Owners also need to pick a target market and go after it.
“Don’t try to sell to everyone,” Bergen says.
Bergen is a co-author of “How to Fight a Price War,” a paper published in the Harvard Business Review. Although it was written in 2000, before the explosion of online shopping, Bergen says its recommendations can be applied to companies competing in a digital economy. You can find it at https://hbr.org/2000/03/how-to-fight-a-price-war .
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