Some competitors seek price increases more aggressively than others

Symptom: Some industry competitors are being more aggressive than others in seeking price increases.

Implications for the market:

• When competitors are aggressively raising prices, they are setting the stage for market hostility, which entails falling prices along with intense, costly competition to improve all aspects of service and performance in order to hold share.

• In the stage immediately preceding hostility — even though prices are falling and service is improving–customers become more, rather than less, contented and volatile.

  • As suppliers scramble for market share, customers have more alternatives to compare. It becomes evident that some suppliers treat the customer less well than others, especially on price.

  • Customers then become more willing to move for smaller differences among suppliers.

• This volatility is exacerbated when a customer has numerous suppliers to begin with, so wise competitors try to keep the customer satisfied with a short list of suppliers.

  • During an industry's good times, customers add suppliers to ensure adequate supply–which makes the management of customer volume very important.

  • During hostility, customers learn that they need two or more suppliers to ensure that they receive the industry's best pricing–so keeping prices competitive may be in the supplier's best interest. The supplier may get less contribution from price but more from a higher volume of the customer's business.