---
title: "Price War: It's All About the Thrill"
description: "Price wars are a common tactic for companies to quickly attack competitors and boost market share, but they can become a vicious cycle of incremental cuts that only erode profits. To be effective, a price war must be strategic, with clear objectives, targeted products and regions, and a plan for follow-up products and exit."
author: "毛小民"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2015-03-13"
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# Price War: It's All About the Thrill

> Price wars are a common tactic for companies to quickly attack competitors and boost market share, but they can become a vicious cycle of incremental cuts that only erode profits. To be effective, a price war must be strategic, with clear objectives, targeted products and regions, and a plan for follow-up products and exit.

Price wars, as an effective weapon for companies to quickly attack competitors, rapidly increase market sales, and seize market share, have long been a favorite tactic for many enterprises. However, once a price war falls into a vicious cycle of cutting prices a little today and a little more tomorrow, it loses its meaning, merely eroding the company's profits day by day without harming competitors. So how should a price war be fought? A price war should be about the thrill—making your heart race. So how can companies effectively use price wars to strike competitors?

Clear objectives, a single decisive blow. Companies must be clear about why they are fighting a price war, and if necessary, elevate it to a strategic level. Once engaged, they should cut prices directly to the cost floor in one step, forcing competitors to hesitate and panic, causing them to fall into disarray.

Choose the right products for the price war. The products selected for a price war should align with the company's objectives. That is, decide which products to use and which to exclude. Generally, companies should choose products that are being phased out or are of little significance to the company, rather than core products. Using core products in a price war can be dangerous because if prices cannot be raised later, the company may find itself in a perilous situation.

Choose the right regions for the price war. This means deciding whether to launch the price war nationwide or in specific regions. Generally, if a company lacks the capacity for a nationwide price war, it is better to focus on specific regions. This is because: First, markets are increasingly regionalized, with different regions requiring different key products. Using a single set of products to attack the national market may fail to achieve comprehensive impact and could burden the company. Second, the company's market layout differs from competitors'. In regions where the company is strong and competitors are weak, there is no need to use price wars to suppress them. Instead, price wars should be deployed in fiercely competitive markets, competitors' strongholds, new markets, hard-to-enter regions, or areas under intense attack. Moreover, different products should be selected for different regions, tailored to local consumption habits.

Fight a war with war, avoiding suicidal or mutually destructive price wars. The purpose of a price war is to expand the market and attack competitors, not to commit suicide or mutual destruction. This requires adopting a strategy of "sustaining the war with war." On one hand, avoid using core profit products; on the other hand, target specific regions. In the past, Changhong launched a price war using its entire line of color TVs nationwide, which not only brought disaster to the industry but also plunged the company into operational difficulties. This lesson is worth heeding for companies planning to use price wars to attack competitors.

When price-war products flood the market, follow-up products must be introduced simultaneously to avoid falling into the abyss of price wars and being unable to extricate themselves. As mentioned earlier, if a company launches a price war, it should be a single decisive blow, not incremental cuts. Cut prices below cost to deter competitors from following. This means the products used in the price war are sold at a loss. Therefore, these products should be used as tools, not as long-term market leaders. Just as an army sends air force and special forces to capture a battlefield and then must send ground troops to consolidate and stabilize it, the products used in a price war are like the air force and special forces. After they bomb and forcibly occupy, the company must quickly send its "ground troops"—the products intended for long-term market presence—to enter the market and secure it. As everyone knows, training air force and special forces is extremely costly. They can quickly seize a battlefield, but keeping them there to stabilize it is risky: first, they are limited in number and cannot do detailed work; second, if captured or annihilated, the cost is too heavy. Similarly, after using price-war products to capture a market, the company must quickly introduce other products to avoid getting too deeply entrenched, lest relying on price-war products to stabilize the market defeats the purpose of the price war.

Determine the phases of the price war. Since the company fights a price war for a specific purpose, it should end it promptly once the goal is achieved. Continuing indefinitely (because it involves losses) will burden the company. Therefore, when launching a price war, the company should set a clear start and end date guided by its objectives.

When the price war ends, replacement products must follow promptly. In addition to promoting other products during the price war, the company must ensure timely introduction of replacement products to phase out the price-war products and avoid further losses. Replacement products are those positioned similarly to the price-war products. They can be priced similarly but gradually restore profitability by reducing promotional intensity. It is unrealistic to completely withdraw the price-war products immediately after the war, as this could cause market fluctuations. However, the company can gradually reduce their sales volume and influence by limiting supply and cutting promotions. Hebei Hualong Group (instant noodles) used its Liudingmu product to launch a price war in Henan. After Hualong gradually established a foothold, it took measures to limit the sales of Liudingmu.

Training and the execution capability of the marketing team are essential guarantees for the success of a price war. A price war requires speed, ruthlessness, and precision. Speed is crucial because if competitors get a chance to catch their breath and counterattack, the effect of the price war will be greatly diminished. Similarly, if the marketing team's execution is poor—for example, if products are sold at low prices to distributors but then sold at high prices, or if there is no price difference at the retail level compared to competitors—the price war's effect will be nullified. Therefore, before launching a price war, the company must systematically train the marketing team on the significance, objectives, operational methods, and requirements of the price war, ensuring the team is ideologically aligned and operationally proficient.

A price war is all about the thrill—not only making your own heart race, but more importantly, making your competitors' hearts race.

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