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This is one of the main conclusions of the 2009 European Pricing Study presented by experts from IE Business School and consulting firm Simon-Kucher, and the only report to analyse the price management policies of European businesses. The authors of the report have consulted over 1,200 European directors of companies in Spain, Germany, France, Holland, Italy, Poland, UK, and Switzerland, to find out about their pricing policy, strategic prioirities, and measures taken to combat the crisis.
Emilio de Velasco, professor of Marketing at IE Business School and co-author of the report, feels that price wars are a direct result of the marketing strategies focused almost entirely on preserving market shares, and a failure to respond to price sensitivity analysis. ´Companies should consider intelligent price-fixing models with differentiating focuses based on client attitudes. Price will not solve current demand problems if price is not the root of the problem´
Félix Krohn, General Manager of Simon-Kucher & Partners says ´the study confirms that Spain is the European country least equipped to avoid price wars, and that pricing here still has a long way to go´
The main conclusions of the report include the following:
- 52% of companies say that they are in a price war. 95% blame the competition for launching the offensive. However, one of the causes could be that 69% of companies give greater priority to volume or market share objectives than to achieving stable prices.
- In over half the sectors that participated in the survey, prices fell sharply in the first few months of the crisis. A further drop of 10% would wipe out the profit margins of most companies.
- 80% of the companies surveyed believe that prices will remain at low levels or that they will fall even further.
- 41% of companies have increased their offers of discounts or special promotions, while only 46% of these applied discounts based on client performance.
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