Voice of the Industry
Price Wars Kill
By Adam Dewitz
Published: November 15, 2009
Kevin Keane, President and CEO of International Association of Printing House Craftsmen sent in a link to an article in the current edition of New Yorker magazine on price wars.
Does this sound familiar:
It’s easy to see how price wars get started. In industries where a lot of competitors are selling the same product—mangoes, gasoline, DVD players—price is the easiest way to distinguish yourself. The hope is that if you cut prices enough you can increase your market share, and even your profits. But this works only if your competitors won’t, or can’t, follow suit. More likely, they’ll cut prices, too, and you’ll end up selling the same share of mangoes, only at a lower price. From a game-theory perspective, price wars are usually negative-sum games: everyone loses. A recent study found that, if competitors do match price cuts, industry profits can get cut almost in half.
Keane writes, “I hope that all printing company owners, Veep's of Sales, Sales Diectors, sale reps and others who make their living from print, might ponder the simple point: Price Wars kill!”