1. Explain the dangers of using discounting as a pricing strategy for increasing sales.

2. Use the Web to research price wars. What conditions usually prompt price wars? What impact do price wars have on an industry and the companies in it? What are the typical outcomes in a price war?

3. Many small companies compete successfully without focusing on providing the lowest prices, even in industries in which customers view product or service prices as important purchasing criteria. What tactics do these companies use to compete successfully without relying on the lowest prices?

When the economy slowed, Jason Robbins, CEO of ePromos Promotional Products, a New York City–based company that sells a variety of promotional products, corporate gifts, and trade show giveaways, resisted using discounts to sustain the 10-year-old company’s sales growth. “We always wanted to be the service leader,” explains Robbins. “Our fear was that once you get people hooked on cheap prices, they wouldn’t pay full price again.” However, after reaching $25 million in annual sales, the company’s revenue began declining rapidly. “Everything just froze,” says Robbins. He and his team of employees began considering price cuts to kick-start sales.