Ghost WatchKey takeaways
- First check whether the cut matters: which products, how many of your sales, how far it moves your position, and for how long.
- Matching is one of six responses. Holding your price, adding value or targeting a narrower offer often protect more margin.
- Respond on the price customers pay at checkout, which may mean changing shipping rather than the product price.
- Avoid automatic “always be cheapest” rules: when several sellers use them, prices spiral down for everyone.
A competitor cuts prices on products that compete with yours. The instinct is to match, quickly. Sometimes that’s right. Often it gives away margin for no gain, and occasionally it starts a price war that hurts everyone. Here’s how to decide.
First, check whether it matters
Ask four questions before doing anything:
- Which products? Exact matches of yours, close alternatives, or products your customers don’t really compare with yours?
- How much of your business? A cut touching your top sellers matters more than one on a slow line. Weigh it by your sales.
- How far does it move you? Going from 2% to 4% more expensive is different from going from cheapest to most expensive.
- For how long? A weekend sale, a clearance of old stock or a permanent new price? Check the competitor’s promotion history if you have one.
Also check the price at checkout, not just the product page. A competitor who cut the item price but charges more for shipping may not be cheaper at all.
Six ways to respond
| Response | When it fits | Watch out for |
|---|---|---|
| Hold your price | The cut is temporary, touches few of your sales, or your customers choose you for reasons other than price. | Track sales on the affected products so you notice if you’re wrong. |
| Match | Exact matches, price-sensitive products, and customers who clearly compare. | Margin. And the competitor may cut again. |
| Change shipping instead | Their advantage is mostly in shipping or a lower free-shipping threshold. | The cost of shipping on every order, not just these products. |
| Add value | You can offer a bundle, a gift, longer returns or faster delivery more cheaply than a discount. | Make sure customers see the value on the product page and at checkout. |
| Target the response | Only some customers are price-sensitive: offer a code to returning customers or email subscribers. | Codes spread. Assume anyone can find it. |
| Reposition | The competitor has permanently moved down-market. | A bigger decision: product range, messaging, maybe a new entry-level line. |
How to choose
Two things decide most cases: how price-sensitive the product is, and how long the cut will last.
- Price-sensitive and lasting: match, or reposition.
- Price-sensitive but temporary: a targeted or time-limited response, or hold and accept a short dip.
- Not very price-sensitive: hold your price and, if needed, add value.
If you don’t know how price-sensitive a product is, your own history helps: look at what happened to sales the last time you, or a competitor, changed the price.
Don’t automate yourself into a price war
Automatic repricing rules such as “stay 1% below the cheapest competitor” are tempting. But if your competitors use similar rules, each cut triggers another, and prices fall until someone’s floor stops them. Use automation for collecting and ranking changes; keep a person in the loop for the price itself, at least for your best sellers.
Record what you did
Note the change, your response and what happened to sales over the following weeks. After a few months you’ll know which competitors’ moves matter and which responses work, which makes the next decision much faster. A weekly competitor review is a good place to keep that record.
Terms in this guide
- Price war: Competitors repeatedly cutting prices to undercut each other.
- Price elasticity: How much sales change when the price changes.
- Landed price: What a customer actually pays at checkout, including shipping, fees and discounts.
- Free-shipping threshold: The order value above which shipping is free.
- Repricing: Changing your prices, often automatically, in response to competitors.