The chances of snaring customers in a price war are very high. As a start-up, it is easier to fall into the price trap while winning customers; but this is a short-term strategy as an entrepreneur is bound to lose at this game.Himanshu Kothari, visiting faculty at the Narsee Monjee Institute of Management Studies, Mumbai, and director for business consulting at Konfluence, raises a question that is very relevant to entrepreneurs and start-ups: Are you a Price Warrior or a Value Warrior? What is your positioning going to be?
“If you play on price, you are always playing with the trepidation of what is going to happen. But if you work on building genuine value for your customers, you are actually rising above the price game,” Professor Kothari says.Before launching your own venture, consider your strategy carefully, he says, warning against the dangers of falling into the price trap. “When you are beaten at this game, what do you do? Keep lowering your price and cut your margins?” Kothari says.
Before going out of business, most firms lower their prices as a last-gasp measure. But, Kothari says, if you concentrate on building value right from Day One, you will not need to bother about your prices. “After all, value is hard to replace. Price is only secondary,” he says.The barriers to entering start-up space are minimal, and an entrepreneur can sustain and succeed if he or she works on value offerings. In fact, entrepreneurship space is replete with David and Goliath stories, of start-ups taking on the behemoths of industry purely on the basis of value. In a nutshell, start-ups should learn to be Value Warriors if they intend to succeed.