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A new startup is undercutting your ride-sharing prices by 30% in one city. How should you respond?

How to approach it

Find out whether the startup's prices are sustainable. Subsidized prices may fade on their own, while a real cost advantage needs a lasting answer.

How a strong answer opens

“I'd first want to know whether the startup's low prices are sustainable. Subsidized prices may fade on their own, while a real cost advantage needs a lasting answer.”

Outline of a strong answer

Try answering out loud for a few minutes before you open this.

  1. Understand their model: subsidy or real cost advantage
  2. Measure impact: riders and drivers lost
  3. Protect the most valuable segments, such as frequent riders
  4. Options: targeted promotions, driver incentives, service quality
  5. Avoid a price war across all markets
  6. Recommend and set review points

Where this question usually goes wrong

Starting a price war in every city to answer a threat in one, without checking whether the rival can keep its prices low.

Learn the method

Responding to a competitor in Module 5, Product strategy.

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