The Restaurant Association says the ongoing price war in the industry is not a healthy approach for business. However, if companies continue to engage in a pricing strategy, a marketing expert has recommended damage control measures.
Ake Pattaratanakun, head of the marketing department at Chulalongkorn Business School, said the Thai retail sector faces tough challenges from the economic downturn.
“During this difficult period, customer behaviour may shift,” he said.
With tightened budgets and an uncertain business environment, consumers may reduce usage of certain products. Some may opt to defer purchases, while others may create the product by themselves, such as customers cooking at home rather than dining out, said Mr Ake.
He said marketers must identify real trends and modify their offerings and strategies to better serve changing customer behaviour.
Regarding the restaurant industry, he expressed concern over the pricing strategies being implemented.
Chanon Koetcharoen, president of the Restaurant Association, said large chains benefit from cost-management efficiency, as bulk orders lower raw material costs. This allows them to use aggressive pricing strategies, drawing customers away from smaller, local restaurants through promotions, he said.
However, smaller restaurants face higher costs, and competing against larger businesses with substantial bargaining power puts more pressure on maintaining slim profit margins.
If many large brands continue launching new sub-brands or cutting prices, it could severely impact small operators, Mr Chanon said.
Mr Ake compared the ongoing price war to a “nuclear bomb”, which will eventually cause all parties to suffer negative consequences.
He advises businesses to manage the damage when price reductions become necessary. For instance, promotional pricing should be confined to a specific time frame, such as a brand anniversary, and limited to certain customer segments, such as loyalty programme members.
Another approach might involve establishing a separate brand specifically tailored for low-cost offerings to protect the main brand’s value.
Mr Ake also warned that extended reliance on discounting strategies might damage brand perception and make it impossible to return to original pricing structures.
credit : https://www.bangkokpost.com/business/general/3086514/eatery-operators-warned-of-harmful-consequences-of-price-war
