When competitors start a price war, the biggest temptation for companies is to lower prices as much as possible. The problem is, a strategy like this can make margins thinner and customers get used to looking for the cheapest prices. Once competitors lower their prices again, we are forced to follow suit again. Over time, businesses can lose profits just to retain customers who are actually not very loyal. Therefore, retaining customers should not only rely on low prices.
Businesses need to provide other reasons for customers to keep choosing them. Product quality, fast service, purchasing experience, ease of complaints, loyalty programs, consistency and good relationships can be differentiators. Customers who feel they are truly getting value usually don't always switch just because there is a small price difference. Companies also need to understand their most valuable customers and take relationships with them more seriously. In a price war, the main goal is not to be the cheapest, but to ensure customers feel that the price paid is commensurate with the benefits received.
