Price last but not least

As all business students once learned (and most probably forgotten), the 4Ps of Marketing are Product, Promotion, Place, and Price. Marketing texts place these 4 points in various orders for recital during the course. Being a maverick and independent thinker like I am (and always have been), I do not necessarily follow the prescribed order. However, one point of consistency always exists for me: Pricing is the last P I cover. This is intentional and a method exists to my madness.
In any competitive situation, the inevitable first reaction (and probably the poorest of the options) for companies and managers is to lower the price, to compete on price alone. Invariably, this will not solve the problem at hand and will more than likely make the situation worse than originally. By my picky ordering of the Ps, I am making the point that not only should price not be the first item considered when in the midst of a competitive situation, it should be the last option considered.
In any competitive situation, be it company versus company or person versus person, the objective is to obtain a sustainable competitive advantage, an advantage the competition cannot readily duplicate. Whatever this is, be it a key patent, new manufacturing process, an identifiable brand, control of channels of distribution, or superior service, the advantage you have over your competition must be one that is long term. The problem with price is that it is a competitive no-brainer, one simply lowers or raises the price accordingly to match or fall beneath that previously enacted by your competition. Any advantage you have on price will last just long enough for a competitor’s rep to pick up the phone and gain permission from their management to match you. And you are right back where you started.
In the extreme, cases of price competition leads to price wars with one side than the other lowering prices in a vain attempt to gain an advantage over each other. This effort is reminiscence of the story of rearranging the deck chairs on the Titanic—a valiant but futile effort. Although the outcome may well be different from that of the Titanic, a price war often has the same feel: deeper and deeper, further and further under the water until no air (margin) is left and you begin to drown for lack of air.
What then should you do? Don’t use price as a shotgun, a weapon to be used for all occasions. Rather, it should be part of a comprehensive strategy with a price chosen to meet the company’s objectives. Then it should be locked up in a vast vault with only one or two people having the combinations that will open the safe and allow the prices to be changed. This is not to say that prices should be written in concrete or on tablets and held fixed for years or decades at a time as gospel from on high. No, this is the extreme opposite reaction. Times change and situations change accordingly. A regular evaluation of a firm’s pricing structure must be held.
Price may be the most visible of the Ps and the one most tempting to use but inevitably the one with the least staying power. What I hope to hear from my students is that they, as successful businesspersons, have remembered my lesson and of all the weapons they have at their disposable as marketers, price is the last one to be unsheathed. So now you too have had your lesson for the day.