Competing on price?

Tight market and a scarcity of new business opportunity has driven some industry players to compete on price as their lead strategy. I’ve always thought that competing on price alone was a dangerous game but maybe I’m wrong. I accept some movement is at times required but recently I’ve been made aware of competitors doing business at 30% of our normal industry terms.

My issues have always been:

1. Can I retain my best people if I can’t pay them well because my fees are so light?

2. Am I respecting the professional competence of my people?

3. Can I go back to my clients and double or triple my fees once the market improves?

4. Will someone always be prepared to go cheaper and if so what is the bottom?

5. Can I actually do the right thing by my client if it’s not sustainable in terms of profitability?

6. If my only value is price then where does it stop and how sustainable is my business?

Perhaps I’m ignoring an extrodinarily challenging market but I would much rather push up the value chain with increased service whilst accepting less volume than playing in a pricing war.

It will be interesting to observe where these price players go from here?