If you ever thought you should be more competitive with pricing, this is a must read for you.

My stance is and will always be: you can NEVER win a price war! There will always be someone willing to undercut you. There is always someone hungrier. There is always someone with deeper pockets to ride out a price war.

You won’t win.

Period.

Prime example sent in by Greg Douglas of Douglas Environmental (http://www.douglasenviro.ca)

From the New York Times:

In Manhattan Pizza War, Price of Slice Keeps Dropping

By N. R. KLEINFIELD

Published: March 30, 2012

In the amped-up war of commerce and 75-cent pizza on the Avenue of the Americas in Midtown, a perilous moment is approaching. Circumstances suggest that ravenous New Yorkers might soon witness 50-cent pizza, 25-cent pizza or, yes, free pizza.

How low can they go in the price war on Avenue of the Americas between 37th and 38th? “We might go to free pizza soon,” one combatant said. 

It is that caustic. Neither side is willing to yield an inch — or a cent. Escalation seems imminent.

As so often happens in twisty New York stories involving wallets and food choices, who is being picked on and who is attacking vary in the telling. Convenient facts get omitted from the narrative.

It’s best to start at $1.50 a slice.

That is what pizza was selling for about a year ago at a family business that is a combination vegetarian Indian restaurant, candy store and pizza parlor on Avenue of the Americas (also known as Sixth Avenue), between 37th and 38th Streets. It is called Bombay Fast Food/6 Ave. Pizza.

Then a Joey Pepperoni’s Pizza opened near the corner of 39th and Avenue of the Americas, offering pizza for $1, a price that has in recent years been favored by a number of New York pizza establishments.

So Bombay/6 Ave. Pizza shrank its price to $1 too.

All was good until last October, when a third player entered the drama.

A 2 Bros. Pizza, part of an enlarging New York chain of 11 shops that sell slices for a dollar, opened virtually next door to Bombay/6 Ave. Pizza. The only separation is a stairwell that leads up to a barbershop and hair salon.

Price stability at a buck all around persisted until eight days ago, when both 2 Bros. and Bombay/6 Ave. Pizza began selling pizza for the eye-catching price of 75 cents a slice, tax included — three slender quarters.

(This alone was not a milestone. The Ray’s Pizza on Broadway between 54th and 55th introduced a 75-cent slice for a limited time in January of last year. Slices are now 99 cents, plus tax: $1.08.)

The primary owner of Bombay/6 Ave. Pizza is Ramanlal Patel, 68, who also has a few businesses in Atlanta and holds property in India.

His nephew, Bravin Patel, 45, oversees the establishment. He and his manager, Mohid Kumar, 49, were there the other day griping about 75-cent pizza.

“I’m thinking, God help me,” Mr. Patel said.

They said that 2 Bros. was trying to drive them out of business, that 2 Bros., unprovoked, slashed the price to 75 cents, forcing them to follow, that things were miserable, that Ramanlal Patel has serious kidney problems, that property in India had to be sold to keep the place going.

“We’re angry,” Bravin Patel said.

Depicting the battle as “small guy” (Bombay) against “big guy” (2 Bros.), Mr. Patel said: “He comes in and he thinks he’s king.”

Mr. Kumar said he was contemplating checking with a lawyer to see if there might be a city law that somehow prohibits a business from selling pizza at outlandishly cheap prices.

But as is so often the case in battles like these, the other side told a slightly different story.

At the St. Marks Place office of 2 Bros., its owners, the Halali brothers Eli, 29, and Oren, 27, identified the true aggressor as Bombay/6 Ave. Pizza.

Here’s how they described it:

On Thursday evening a week ago, Bombay/6 Ave. — unprovoked, and without warning — cut its pizza price to 79 cents. The next morning, 2 Bros. retaliated by moving to 75 cents (its owners felt it was easier to make change from a dollar than at 79 cents). Bombay/6 Ave. matched the 75 cents, and that’s where everything sits.

“We don’t sell pizza at 75 cents,” Eli Halali said. “But if they think they’re going to sit next to us and sell at 75 cents, they’ve got another thing coming.”

Could they prove it? At this point, it was just one pizza seller’s word versus another’s.

But 2 Bros. has a security camera. Winding back to the night in question, the night of the sudden 21-cent price drop, a manager found frames that showed the front of the two stores. And there it was: Bombay/6 Ave. Pizza’s 79-cent sign when 2 Bros. was at $1. Mr. Patel and Mr. Kumar had made the first move.

When they were apprised of this information, they said they did not realize there had been interest in talking about 79-cent pizza.

Why, then, did they lower their price first?

“He was taking away our customers,” Mr. Kumar said. “How were we going to pay our rent?”

For his part, Eli Halali made it clear that 75 cents was a temporary price point. He said he could not make money at that level and eventually would return to $1. He said that if Bombay/6 Ave. Pizza went back to $1, he would as well.

Mohit Mitra, in white hat, served a customer at Bombay Fast Food/6 Ave. Pizza on Avenue of the Americas. One customer said, “We need 75-cent hamburgers next.”

If it didn’t, he said, it better watch out.

His father, Joshua Halali, who acts as a consultant to 2 Bros., said, “I suggested to my children to go to 50 cents.”

Oren Halali said, “We might go to free pizza soon.”

Eli said: “We have enough power to wait them out. They’re not going to make a fool of us.”

The brothers said they are also contemplating adding fried chicken to the Avenue of the Americas store to intensify the pressure on Bombay/6 Ave. Pizza.

Meanwhile, Mr. Patel remains intransigent. “We’re never going back to $1,” he said. “We’re going lower.”

“We may go to 50 cents,” Mr. Kumar said. Of his next-door rival, he said: “I want to hit him. I want to beat him.”

They had added the name, Pizza King, to the sidewalk sign out front, hoping a regal nickname might do some good.

Related prices at both establishments have also tumbled. The special of two slices and a drink dropped to $2.25 from $2.75. An entire pie fell to $6 from $8 (actually to $5.99 at Bombay/6 Ave. Pizza).

A haircut at the barber located between them is $12. Better that you eat.

As for Joey Pepperoni’s, Met Zade, one of the owners, said: “I can tell you we’re absolutely not dropping our price. For $1 a slice, you can still make a profit. For $1, an owner can still sit down and eat. At 75 cents, you’d be a mouse on a wheel.”

While the pizza parlors insult one another, the eating public couldn’t be happier.

At 6 Ave. Pizza, Mike Dooley, 60, a maintenance worker, said while polishing off a slice: “I think it’s beautiful. We need 75-cent hamburgers next.”

At 2 Bros., John Combs, 46, a carpenter, said, with a mouthful of pizza: “It’s awesome. I’m from Jersey, but any time I’m in the city I’ll be back. It’s awesome.”

You see it?

A no-win battle.

Yes – you may get more customers - but you are going to lose your shirt in the process.

I don’t call that winning in business.

Look throughout history… never has price alone been a long-time winning strategy.

Walmart is still around… but in the grande scheme of things… they haven’t been around long at all.

NOT ONE PRICE LEADER LASTED IN THE LONG TERM.

Interesting lesson there if you ask me!

I repeat… you will NEVER win a price war… don’t bother trying.

Look at what has happened to the Groupon customers or fad-of-the-day coupon sites.

They may have gotten new customers in the door… but they are AWFUL customers to have!

They buy based on the cheapest price of the day…

…and have NO INTENTION on ever coming back.

And are proud to admit it.

Yee haw – fun customers to lose your shirt for!

Just don’t do it.

There are far too many other ways to win the marketing game.

Have a great day.

Troy