Dumping and price discrimination - the pros and cons

Some companies, in order to outrun their very strong competitors, are ready to use a variety of methods. Among them is the artificial understatement of prices, that is, dumping measures. We propose to find out what to do if the competitor damps.

Dumping - what is it?

Every entrepreneur should know that dumping is the sale of goods and services at artificially low prices. Such prices are several times lower than market prices, and sometimes even lower than the cost of goods and services. The tasks of dumping are very different:

1. Penetration to a new market . Sometimes artificial reduction of prices is an important condition for moving to new markets.
2. Fastening in new markets . To establish itself and reliably gain a foothold in new places, it is important to apply dumping.
3. Ousting of competitors . This is one of the best moves in the fight against strong competitors.

Often dumping is conducted by the state or the company on the basis that in the future all losses will be reimbursed. It also happens that dumping is used as a one-off event, monetizing inventory and selling illiquid products. In some countries, the artificial understatement of prices is considered a negative phenomenon, and it is combated, applying anti-dumping laws.

Is dumping legitimate?

Such notions as dumping and price discrimination have much in common. Under the price discrimination is understood as the realization of one product or service in different markets at completely different prices. In this case, the goods in one market can have a low price, and in another place of sale they can be sold at inflated prices. This phenomenon is associated with the monopolization of markets and the application of high prices. For the reason that a certain company occupies a monopoly position in the market, it has the opportunity to sell products at inflated prices. So the firm receives income.

Dumping-pluses and minuses

Such a phenomenon as dumping has its advantages and disadvantages. Among the advantages:

1. The opportunity to introduce and promote goods and services in selected markets.
2. Effective promotion of goods and services.
3. No additional attachments are required.
4. Favorably different from other methods of attracting customers.

Has such dumping cons:

1. Decrease in the performance of the company.
2. Reduction of profitability and profitability of the enterprise.
3. The attitude of the professional community towards the company is deteriorating.
4. Possible negative attitude of consumers towards products.

Signs of dumping

Beginners and already experienced entrepreneurs understand that dumping is a method that promotes effective struggle against competitors. Experts call such signs of this phenomenon:

1. Refusal of profit due to lower prices.
2. The quality of products suffers, as well as customer service.
3. Prices have become low not as a result of special marketing programs.
4. The price reduction is directed to the struggle with competitors.

Types of dumping

There are such types of dumping:

1. Price - the price for exported goods is lower than the price for the same product in the domestic market.
2. Value - this is when the product can be sold below the cost price.
3. Monopoly - a company can occupy the entire market and sell goods abroad lower than it sells on the domestic market.
4. Technological - the sale of goods and services at low prices as a result of high productivity through the use of modern technology.
5. Social - the definition of price benefits.
6. Sporadic - the import of products in large quantities to the domestic market. Its purpose is to reduce illiquid goods.
7. Intentional - a special reduction in the value of goods for export.
8. Mutual - the realization of one product by several countries.

How to dump correctly?

If the company needs forced dumping, it is important to understand how to dump and adhere to the following rules:

1. Approach the very process of reducing prices as much as possible creatively. As an option, you can reduce the price not for the same product as the competitor, but for the one that brings the maximum revenue.
2. Each sale should have a reason and be limited in time.
3. Reduce prices only in mature markets.
4. It is important to ensure that the end user can benefit

Consequences of dumping

Speaking about the consequences of this phenomenon, it is impossible not to clarify the dangers of dumping:

1. Profitability decreases.
2. Customers begin to choose products where they are cheaper, thereby "wringing out their hands" to sellers.
3. Sellers receive confirmation that the most important price is for buyers. Later, employees will not be easily persuaded to work with products that do not have price advantages.

How to deal with dumping?

Sometimes, in order to defend their "place under the sun", it is necessary to fight against the dumping of competitors. We offer valuable advice for those who want to win it:

1. Mask the prices. You should set the average price for the product or service that suits you. Goods of poor quality can be sold at underpriced prices, and average prices should be set to average prices. As for the best products, then the prices should be high.
2. Create package offers. An example may be mobile operators selling not individual products, but service packages.
3. Plan a temporary action to reduce prices. In this case it is necessary to clarify that after a certain time, prices will be the same.
4. To make the goods more valuable. To do this, you should reduce prices for a certain time. In this period, buyers need to say that the products are much better and more valuable than their competitors.