Avoid Price Wars: IKEA vs. Lidl
Danilo Zatta, PhD, MBA
Helping companies grow revenues and profits I TopLine, Pricing & Revenue Models Advisor
Dear Friends,
Germany witnessed a short and fun price war between the retailer Lidl in Deutschland and the furniture corporation 宜家 : a real ‘Blitzkrieg’, due to its speed. At the end, as with most price wars, there was only one winner: the customer.?
Let’s deep dive this case below.
Always great to find pictures of readers with one of the pricing books on social media or, as in this case, on amazon. Thanks a lot for the nice book review and the shot with A.B. who writes:
‘Really enjoyed 'The 10 Rules of Highly Effective Pricing.' It's a straightforward, insightful read that offers practical tips on pricing strategies. Definitely a must-read for anyone looking to refine their approach to pricing. Highly recommended!’.
Please continue sharing such great feedbacks.
In case you missed them, here selected posts:
New exciting topline transformations at Valcon : great to kick off new international topline transformation programs for leading corporations with a short term double digit payback. Excited to be part of this great team. Find a deep dive here.
Trusted advisor at the Enxis: Enexis, the Dutch electricity and natural gas supplier chose us as trusted advisor as indicated here.
Insightful pricing event in Milan: Join us for free on October 2nd at the Amazon Web Services (AWS) office in Milan with Danieli Group and Syncron for an exclusive pricing event focusing on the power of data-driven decision-making. Enroll asap: seats are limited! You will get a free book copy with personal dedication as a gift. Find a deep dive here.
Avoid Price Wars: Ikea vs. Lidl
‘Avoid Price Wars’ is one of the key elements that characterizes an organization with a high pricing maturity and it is one of the 10 pillars you find in the book ‘The 10 Rules of Highly Effective Pricing’.
Still also large and established corporations like the German retailer Lidl and IKEA tap into price wars.
This happened last week when Lidl in Germany decided attacking IKEA on a set of easily comparable products.
The product development teams of Lidl and IKEA either independently came up with surprisingly similar products or one of the two emulated the products of the other. However it went in the respective product departments Lidl made ads with direct products comparisons, strongly undercutting prices of its rival, i.e. (in euros):
领英推荐
Lidl’s price cut was higher than 60%! Would you expect a giant like Ikea doing nothing and watching competitor winning their customers with such actions?
Of course not!
IKEA reacted one the same day of Lidl’s announcement undercutting the competitor’s price points by up to minus around 70% even before Lidl's prices became effective.
The reaction of IKEA in this short ‘Blitzkrieg’ was as fast as strong. However the most amusing thing was the slogan used by IKEA: ?A Lidl bit günstiger.“ Which in German reads like ‘a little bit cheaper’ with an evident reference to Lidl’s prices that were undercut by IKEA.
The clear message of IKEA to its competitor was: ‘don’t mess with me, Lidl! We won’t do nothing and watch how you are capturing our clients.
Worst thing?
Compared to the initial price positioning IKEA lowered its prices by 60%+. Making up for this price difference with higher volumes is typically unrealistic and most companies loose profits without being able to compensate this loss via the newly generated volumes. Wining in price war is an illusion. The only clear winner is the shopper. Let’s always be aware of this risk.
This battle was picked up by several media and pricing colleagues on LinkedIn as the ironic reply of IKEA was unbeatable. Probably it was for both players a win-win in terms of media and brand awareness. ?
What can we learn out of this?
Price wars very rarely pay back and thus make sense. The focus of the whole action is price. While it should be the opposite. Value should be in the focus. Absence of a value focus promotes price wars.
What is your view on this?
Interested in learning more about ‘Avoid Price Wars’? You will find a deep dive on all this in the book The 10 Rules of Highly Effective Pricing, released by Wiley with deep dives on:
Peter Brabeck-Letmathe, Chairman of Nestlé a.d., said on the book: ‘This book is a game changer: it will help you increase profitability through 10 concrete rules on how to manage pricing. Dan Zatta, leading strategy and monetization thought leader, brings new perspectives, relevant for every company.’
Get your copy of ‘The 10 Rules of Highly Effective Pricing’ here.
Get your copy of ‘The Pricing Model Revolution’ here.
You are most welcome to share your views, feedbacks and own pricing experiences. Thanks a lot for your interest and support!
Brand, design and tech enthusiast. Mountain biker. Founder. Mentor.
3 个月?? On the two days of this price battle, I participated at one of those rapidly evolving discussions here on LinkedIn. I was surprised how many people supported the challenger (Lidl). Looking at the battle through brand management glasses, I’d be worried about Lidl’s infringement of intellectual property rights more than about the price attack. ??? IKEA has been temporarily lowering prices for members of IKEA Family for a long time. The consumers know it, so I can’t see any danger of lowering the price point. In fact, it’s part of IKEA strategy that they permanently reduce prices for a product. Sure, then it’s maybe 10%, nevertheless still a permanent reduction. ?? You cannot find any generic product at IKEA, maybe except for door hinges. Every single product at IKEA is designed by them, the designer’s name is printed on the product or on the packaging. IKEA’s mission is built on democratizing good design. The TJUSIG series has been on the market for at least a decade, probably even more. They have registered dozens of designs (I haven’t checked every single one), not sure if this one too. Anyway, LIDL consciously copied their product so as to start a price battle. What a poor game… ?? #brandmanagement #intellectualproperty
Key Account Manager Sapio
3 个月thanks Danilo for sharing. At the end of the game Lidl can take a place in the market on a low cost product for a single campaign, while Ikea will probably have the strength to create a slightly higher quality product and bring itself back to the same price. They can set it for a more demanding segment of customers or simply those who do not want the first price, and I am sure there are many.
Obsessed with Pricing | Socia @ Prisier
3 个月Great article, Danilo. I would however argue that the "wins" from consumers on price wars are extremely short lived, since they usually end up paying in the longer term in reduction in quality, reduction in innovation and eventually employment opportunities
AI Founder & CEO @ FutureUP | Building the Future of Price Optimization | Top 50 Thought Leader in AI | Raised $9m in VC funding in AI
3 个月I love this story, Danilo Zatta, PhD, MBA! Price wars have a special place in my heart, and there is a reason for this! Back in the mid-1990s, when I did my MBA in London, I heard for the first time a case study about a price war between Shell and other oil companies. All companies started cutting off prices, and everyone was unhappy apart from the customers! But then, Shell decided to study their price elasticity versus their competitors and felt they could get away with smaller price decreases or even small increases. So they gradually increased their prices, and eventually, all competitors followed, and the market stabilized. In the end, Shell won the price war simply because it got more scientific than its competitors and was bolder with its decisions. Rumor was that our marketing professor was part of the team that did this! I wasn't able to confirm this, but the case helped me understand the beauty and power of pricing dynamics and rules in commercial success! Fast forward 30 years, and I’m into AI-powered price optimization, so in a sense, price wars inspired me! Thanks, Dan, for a great lesson on what to do or avoid during price wars and a reminder of how strategic pricing can be!
How they were able to cut price by -260%? How you can cut prices more than -100%?