It happens all the time. A competitor nearby drops their price, and the natural reaction is to drop yours too. It feels like the safe move. Often, it is the most dangerous one.
A simple example
Imagine a product that normally sells for ₹1,000. Your competitor starts selling it for ₹850. Your cost for that product is ₹750.
If you match them at ₹850, you keep about ₹100 per sale. Out of that, you still have to pay for delivery, staff costs and payment charges. Go any lower and you will still make sales, but there will be no profit left.
Ask why the competitor cut the price
Before you react, find out what is really happening:
- Are they clearing old stock?
- Is it a temporary offer that will end in a few weeks?
- Do they simply have a lower cost structure than you, for example cheaper sourcing or lower overheads?
Each answer calls for a different response. None of them automatically means you should copy the price.
Set your price on three things
Do not copy competitor pricing. Decide your price by checking three things:
- Your cost. What does it really cost you to deliver this product, including the hidden costs?
- Your margin. What do you need to earn on each sale to run and grow the business?
- Your customer value. What do your customers value about buying from you: service, quality, trust, convenience?
The takeaway
You may win the price war, but still lose your profit. Keep losing profit, and you lose the business. Price with your own numbers, not your competitor’s. Reviewing cost, margin and pricing is a regular part of how we help existing businesses grow.
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