一家M 周报的出版者发出以下讯息

 

一家M 周报的出版者发出以下讯息：

 

No. 4. The publisher of The Mercury is jumping to conclusion that The Mercury should reduce its price below that of the competing lower-priced newspaper, The Bugle. Such conclusion is based on the first belief that the lower-priced Bugle has taken share away from The Mercury because of price factor alone, on the second belief that the proposed price reduction will increase The Mercury's circulation to former levels of the pre-Bugle era, on the third belief that increased circulation of a price-reduced Mercury will attract more businesses to buy advertising space in the paper, and on the assumption that the demand for both The Mercury and The Bugle is elastic. Such conclusion may be far from optimal.

 

The evidence that The Mercury's circulation has declined substantially since the lower-priced The Bugle appeared could have reflected more than the influence of price alone. The loyalty of consumers is based on the product or service consistently meeting or exceeding consumers' expectations. The decline in The Mercury's circulation might have occurred anyway if it failed to meet its readers expectations in quality, quantity, timeliness (and/or convenience) and cost. The appearance of the low-priced The Bugle might just have accelerated The Mercury's decline by providing additional competition and a low-priced alternative. We do not have information whether both papers have similar target readers, contents, timeliness and convenient distribution. Price could only be one factor of competition because the 4-P variables of a marketing strategy include product, price, place, and promotion. Assuming that The Bugle is a weekly newspaper and the major competitor in the same market, it might have won in product quality and features or distribution convenience as well as price. If The Bugle is sufficiently differentiated to have achieved non-price-based loyalty, its demand will be less elastic and its readers may not respond to The Mercury's price reduction initiative to recapture market share. Before jumping to conclusion, the publisher of The Mercury should have undertaken market research to diagnose its strengths and weaknesses relative to the competition before prescribing solutions.

 

The Mercury publisher's price reduction strategy may spur competitive reaction too. If The Mercury is undercutting the Bugle in price and is hurting The Bugle's sales, it is highly likely that The Bugle will respond in kind and a price war will break out. It will be a "lose-lose" situation. Both papers will lose and suffer margin squeeze while the market share stays unchanged. The Mercury will see neither an increase in circulation nor more advertising. The only beneficiaries are the readers who will get inexpensive weekly newspapers. In addition, if The Mercury has a much bigger circulation than The Bugle to start with, a price war will hurt The Mercury more than the Bugle because of the bigger revenue loss in absolute terms. Assuming market research has shown that The Mercury still has core reader support but The Bugle has its own niche and is somewhat differentiated from The Mercury in content emphasis and target readers, the publisher of The Mercury may publish a minor weekly newspaper as a fighting brand aiming at the same market as The Bugle's, and pricing it at par or below that of The Bugle. In this way, the mini price war will hurt The Bugle more, while The Mercury can still retain its core readership without going through the trauma of a major price war itself. That is usually how a major brand can ward off a minor brand's encroachment, by using a fighting brand to "discipline" the minor brand and keep it in check, or even drive it out of business.

 

The argument may be modified to read as follows:

"Since a competing lower-priced newspaper, The Bugle, was started five years ago, The Mercury's circulation has declined by 10,000. Market research has shown that The Mercury's core reader support is still strong. But The Bugle has its own little niche and is somewhat differentiated from The Mercury in content emphasis and target readers, and is taking share away from The Mercury only by swaying non-core customers. The Mercury should therefore set up another newspaper as a fighting brand, aiming at the same target readers as The Bugle's and pricing it below that of The Bugle to force it into a price war. In this way, we shall take share away from The Bugle and threaten its viability, without hurting The Mercury's current position."