How to win a price war?

YOU CAN... to an Extent..... Don't make a mistake of pushing it too far!!

Like the word says, this pricing is done to counter the competition from old and established players by the new entrants in the market...

The Japanese follow this art to the core.... And the Chinese gain the bad name...

The penetration pricing has to be just the right balance. On one hand, if the price is set too low, a company not only gives up potential revenues but also sets a perception of low quality for this new product, which can make future price increases difficult. On the other hand, a price set too high might harm the take-off and diffusion of the new product, limit gains from experience effects, hinder the product from reaching critical mass or necessitate embarrassing price cuts.

Pricing penetration strategy involves charging a low price to rapidly reach a wide fraction of the market and initiate word-of-mouth. Penetration pricing is designed to enlarge market share and exploit economies of scale or experience.

Simple example is you can't sell Nike at the Dollar Store.... 

And neither you can introduce a product which is priced almost like the dollar store products, cause once it gathers that image, it will never be able to get rid of it and the graph begins to slide to the south...

Now penetration pricing depends on various factors....

• -The goal or objective of launching the product( how much revenue needs to be generated to fill the coffers)
• -The target audience ( If the auntie next door is gonna buy it or her daughter)
• -Ongoing cut throat competition between existing players ( cola owner trying to drown another cola owner in cola itself)
• -Product life cycle ( how soon you wanna kill it to launch a new or next one)

Now all of these point are obviously studied by the current players too to counter threats from new entrants for which they are ready to play fire with fire ( cheapness with cheapness to be precise)

Best example will be the telecom company price war, the cell phone company price war. I am waiting for the day when they give you a cell phone free with a tooth- brush.

But there are few downside to it also. Like a big brand cannot use this strategy. Like Apple can't use this strategy ever for the kind of image they have made for their products. And most of the FMCG brands can't use this strategy cause they are meant to be low priced... So lots of ifs and buts and lots of pros & cons and lots of implicit and explicit marketing strategies to go along with this recipe...

Keep thinking what pricing strategy you should follow..... Or ask an expert.....