A price-cutter is a business or individual that consistently offers goods or services at lower prices than their competitors. They often employ strategies like reducing profit margins, bulk purchasing, or streamlining operations to achieve cost advantages. Their aim is typically to gain market share by attracting price-sensitive customers. Price-cutting can trigger price wars, potentially benefiting consumers in the short term but also leading to reduced profitability and even business failures if margins are squeezed too thin. The success of a price-cutter hinges on maintaining cost efficiency while still delivering acceptable quality.
Price-cutter meaning with examples
- The aggressive tactics of the new price-cutter in town forced the established hardware store to re-evaluate its pricing strategy. They had to decide whether to lower their own prices to compete, potentially sacrificing profits, or to maintain their current pricing and risk losing customers to the cheaper alternative. The resulting price war created a dynamic shift in the local market.
- The online retailer became a successful price-cutter by sourcing products directly from manufacturers and cutting out multiple layers of intermediaries. This allowed them to offer significantly lower prices than traditional brick-and-mortar stores, attracting a large customer base. Their business model focused on volume and efficient delivery, which allowed them to maintain profitability despite the lower prices.
- As a price-cutter in the fiercely competitive airline industry, the budget airline constantly looked for new ways to reduce costs. They optimized flight routes, offered limited services, and charged extra for baggage to keep ticket prices low and attract cost-conscious travellers. This approach proved successful in driving up their passenger numbers. This resulted in increased competition for the more premium airlines.
- The introduction of generics in the pharmaceutical market led to a wave of price-cutters, offering the same medications at a fraction of the branded drug's cost. Patients and insurance companies benefited from the lower prices, however, there was concern about the safety of the generic versions of the medicines. This resulted in an active effort to ensure regulatory requirements were met.