01 · Recognize
Competitive response
How should we respond to a rival or a disruption?
You are in this case when
- A competitor just did something: a price cut, a launch, a new model.
- The client’s instinct is to match, and the case is whether to.
02 · Structure
Which drivers matter?
- 01
Threat
Who is at risk?Which customers, jobs and profit pools the move actually touches.
- 02
Position
Why we win todayDifferentiation, cost position, switching costs and channel power.
- 03
Response
Options, then reactionsDefend, differentiate, partner, pivot or exit; test the rival’s likely next move.
Expected impact = affected volume × contribution per unit − cost of the response
03 · Solve
Work the scratch sheet.
Illustrative practice scenarioA rival cuts price 15% on a product where we sell 100,000 units at $20 with $12 of variable cost. If we hold price we expect to lose 20% of volume.
- Contribution today100,000 × ($20 − $12) = $800,000
- If we match at $17$800,000 ÷ ($17 − $12) = 160,000 units needed, +60% volume just to stand still
- If we hold and lose 20%80,000 × $8 = $640,000 (−$160,000)
Matching needs 60% more volume to break even; holding costs $160,000. Neither is the answer by itself. Find out why customers would switch before touching price.
Work backward from an answer
If the answer is “match the price”, volume must rise enough to cover the thinner margin. So compute the break-even volume before saying the word match.
04 · Recommend
Make the call in three buckets.
Hold price; defend the 20% at risk with service and bundling.
Matching needs 60% more volume to stand still; holding costs $160,000, which a targeted retention offer can beat.
Identify which customers would switch and why; pilot a bundle for them. Risk: the rival cuts again and the gap becomes structural.
“I would identify why the competitor wins before deciding whether to match its offer.”
Watch for: Matching a rival’s price can start a price war without fixing the reason customers switch.
Special sauce
Bring a real company into the room.
Would you fund a second season if viewing is high but subscriber retention barely changes? Identify the comparison group before calculating the return.
Read the story →growth · Media & entertainmentDisneyShould a new title stay exclusive or be licensed elsewhere? Compare incremental retained subscriber contribution and ad contribution with the licensing contribution forgone.
Read the story →Three terms to use
- Switching costs
- What a customer gives up to change provider: money, time, risk.
- Price war
- Successive cuts that lower industry contribution for everyone.
- Differentiation
- A reason to choose you that survives a rival’s price.
Original Harper practice examples; every figure is illustrative. Adapt the questions to the client’s objective, timing and constraints.