0% higher than their most expensive competitor and then prove that they are well worth the price. This is a better positioning strategy than to bow to the unprofitable pricing practices that the current marketplace demands.

The only companies who have escaped this madness are the ones that realized a low-cost pricing strategy will never lead to long-term brand success. Once they stopped worrying about how c

While judging a freshman business plan competition at a local university, I noticed a pattern. Each of the student groups said they were developing a premium brand, but they would use a low-cost penetration pricing strategy. Even though they were often selling at a loss, they explained that by entering the market as the low price leader they would gain market share, people would fall in love with their product and they could raise their prices once they had built customer loyalty.

I could not think of any company that after entering the market with low-cost pricing, went on to be a dominate premium brand and could command an above market price. So, as a judge, I reminded them that “using this logic, they will develop a commodity level brand with very little loyalty and being a commodity is a hole few companies could ever hope to dig themselves out from.”

I know what you’re saying, “they are freshman and have a lot to learn about business.” Hopefully these students have learned from this and will think differently when it really counts. However, this flawed thinking is not reserved for the business school novice because most companies can't get it through their thick skulls that a low-cost pricing strategy doesn't work and does not build customer loyalty.

Big box store “low-price guarantees” are creating a marketplace full of people who are fixated on price. Customers are no longer loyal to most brands and will switch from their “favorite” brand for a few pennies. These customers are loyal to low-price, not a particular brand. Because loyalty cannot be based on price, I would much rather see a company say that they were 10% higher than their most expensive competitor and then prove that they are well worth the price. This is a better positioning strategy than to bow to the unprofitable pricing practices that the current marketplace demands.

The only companies who have escaped this madness are the ones that realized a low-cost pricing strategy will never lead to long-term brand success. Once they stopped worrying about how co

d they could raise their prices once they had built customer loyalty.

I could not think of any company that after entering the market with low-cost pricing, went on to be a dominate premium brand and could command an above market price. So, as a judge, I reminded them that “using this logic, they will develop a commodity level brand with very little loyalty and being a commodity is a hole few companies could ever hope to dig themselves out from.”

I know what you’re saying, “they are freshman and have a lot to learn about business.” Hopefully these students have learned from this and will think differently when it really counts. However, this flawed thinking is not reserved for the business school novice because most companies can't get it through their thick skulls that a low-cost pricing strategy doesn't work and does not build customer loyalty.

Big box store “low-price guarantees” are creating a marketplace full of people who are fixated on price. Customers are no longer loyal to most brands and will switch from their “favorite” brand for a few pennies. These customers are loyal to low-price, not a particular brand. Because loyalty cannot be based on price, I would much rather see a company say that they were 10% higher than their most expensive competitor and then prove that they are well worth the price. This is a better positioning strategy than to bow to the unprofitable pricing practices that the current marketplace demands.

The only companies who have escaped this madness are the ones that realized a low-cost pricing strategy will never lead to long-term brand success. Once they stopped worrying about how c

ever hope to dig themselves out from.”

I know what you’re saying, “they are freshman and have a lot to learn about business.” Hopefully these students have learned from this and will think differently when it really counts. However, this flawed thinking is not reserved for the business school novice because most companies can't get it through their thick skulls that a low-cost pricing strategy doesn't work and does not build customer loyalty.

Big box store “low-price guarantees” are creating a marketplace full of people who are fixated on price. Customers are no longer loyal to most brands and will switch from their “favorite” brand for a few pennies. These customers are loyal to low-price, not a particular brand. Because loyalty cannot be based on price, I would much rather see a company say that they were 10% higher than their most expensive competitor and then prove that they are well worth the price. This is a better positioning strategy than to bow to the unprofitable pricing practices that the current marketplace demands.

The only companies who have escaped this madness are the ones that realized a low-cost pricing strategy will never lead to long-term brand success. Once they stopped worrying about how c

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