Hinnasõda

Hinnasõda, translating to "price war" in English, is a marketing strategy where competing companies repeatedly lower their prices on products or services to gain a competitive advantage. This aggressive pricing tactic is often employed in industries with high competition and relatively undifferentiated products, such as retail, telecommunications, or airlines.

The primary goal of a price war is to attract customers away from rivals by offering the lowest prices. This can lead to increased sales volume and market share for the participating firms, at least in the short term. However, price wars can also be detrimental. They erode profit margins for all involved, as each price cut reduces the revenue generated per unit sold. This can be particularly damaging to smaller businesses or those with higher operating costs.

Consumers often benefit from price wars due to lower prices and increased promotional activities. However, the long-term sustainability of such tactics is questionable. If a price war continues for too long, it can lead to financial instability for businesses, potentially resulting in bankruptcies or market consolidation. Some companies may also resort to compromising on quality or customer service to offset the reduced profits. Central to a price war is the cyclical nature of price reductions, where one firm lowers its prices, prompting competitors to follow suit, and this cycle repeats.