The problem most companies have with their competition is their attitude. By viewing themselves as victims, companies justify many of their destructive behaviors, such as rampant discounting.
Companies are urged to change their attitude of powerlessness and replace it with one of confidence. Additionally, they urge companies to acquire a better understanding of their competition so they can make better decisions based on how the competition will most likely react.
Companies must develop well constructed game plans that focus not on beating out their competitors, but rather on getting them off their backs. This process is designed to ensure that everyone in a company is cooperating and presenting a unified front.
Step 1. Improve Understanding of the Environment: Make sure the people making the decisions have a strong understanding of the current competitive environment.
Step 2. Determine Pricing Strategy: Choose one of three pricing strategies: skim, neutral, or penetration.
Step 3. Develop Communications Policy: This will help avoid price wars. Establish a communications policy that controls what people say to anyone outside the company.
Step 4. Determine What to Say: Determine what the right thing is to announce to the market. Recognize that what the company says may set industry standards.
Step 5. Determine What to Do: Back up what the company says with practices.
Step 6. Monitor Results and Improve the System: Assess what competitors are doing and what is happening inside the organization itself. Monitor what is working and what is not working and improve the system.
Companies are advised to create discount grids which provide managers and salespeople with information on what to say and what to do in specific pricing and selling situations. Discount grids reduce conflict and anxiety and allow the organization to work in the same direction.
If used effectively, discount grids should prioritize a company's primary customer segments into these four categories:
Current Strong Segments: The company has a strong market position with this segment. They should defend this segment.
Grow Segments: The company is growing in an area where competitors are stronger with this segment. This segment receives the majority of discounts.
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