Research Insights 9.2 How to Win a Price War

Price and Customer Value Decisions

Source: Reinemoeller, P. (2014). How to win a price war. Sloan Management Review, 55(3), 15–17.

Abstract: The article discusses price wars between competing companies, presenting recommendations for business strategies as of 2014 and focusing on the business methods used by the grocery company Albert Heijn BV during a price war in the Netherlands between 2003 and 2005. Recommendations include aligning revenues with cost structures and monitoring initiative effectiveness.

Insight: This article, based on a study of Albert Hejn in The Netherlands, explains that companies can win price wars by leveraging five strategic capabilities, including 1) the ability to affirm the need for a price war, 2) the ability to carefully select an appropriate battlefield using advanced analytics capabilities, 3) the ability to pick a single target competitor 4) staying under the radar (by targeting former customers rather than explicitly poaching new customers) and 5) the ability to align revenues with reformed cost structures.