What effect does competitive pricing have on brand loyalty in BSG?

Competitive pricing typically harms brand loyalty while often increasing sales in the Business Strategy Game context. When a company adopts a competitive pricing strategy, it often does so to attract price-sensitive customers who may prioritize cost over brand affinity. This approach can lead to short-term sales increases, as customers may switch from higher-priced brands to take advantage of lower prices.

However, this strategy can undermine brand loyalty for several reasons. First, consumers may start to perceive the brand as a low-cost option rather than a premium one, which can diminish their emotional attachment to the brand. Additionally, if competitors respond with their own price cuts, it can create a price war where customers continually seek the lowest-priced option, making them less loyal since their purchasing decisions are driven primarily by price rather than brand preference or perceived quality.

In contrast, strengthening brand loyalty typically requires a focus on quality, unique selling propositions, or customer experience rather than merely competing on price. This helps create a deeper connection with the brand, encouraging repeat purchases regardless of minor price differences. So, while competitive pricing can attract new customers and boost sales, it generally does so at the cost of weakening long-term brand loyalty.