ROI Case File No.202 | 'The Crumbling Price Trust of Oceanian Retail'

Chapter 1: The Gamble of Price Increases—The Cost of Trust

One week after the CentralLogistics case, a request arrived from the Southern Hemisphere.

"Detective, we made what should have been the right decision, so why are customers leaving us?"

Emily Hartson, CEO of SouthPacific Retail, couldn't hide her bewilderment. In her hands were sales data and customer churn rate graphs from the past six months.

"Rising raw material costs, increased logistics expenses, higher labor costs... we had no choice but to raise prices. Competitors implemented similar price increases, yet why are we the only ones losing customers?"

Her voice carried the anguish of a leader facing an impossible situation.

SouthPacific Retail's Situation: - 180 stores across Australia and New Zealand - Core products: Food, daily necessities, clothing - Previous year's revenue: 85 billion yen - Implemented average 12% price increase across all product categories in January

"After the price increase, sales were temporarily maintained, but customer exodus accelerated from the third month onward."

The numbers Emily showed were severe.

• Monthly store visitors: -23% compared to pre-increase
• Customer unit price: +8% (price increase effect)
• Total sales: -17%
• Customer satisfaction: 78 points → 51 points (significant deterioration)

Chapter 2: Signs of Customer Exodus—The Work of Invisible Forces

"Ms. Hartson, could you tell us about your criteria for the pricing decision?"

Holmes asked quietly.

"Cost structure analysis led us to conclude that a 12% price increase was necessary. Competitors implemented similar increases, so we thought we were following market trends."

Emily answered confidently, but doubt shadowed her expression.

"However, actual market response differed greatly from our expectations. What particularly puzzles us is why our customer churn rate is so much higher than others."

I posed a question to her.

"When implementing the price increases, how did you communicate with customers?"

Emily's expression darkened.

"Actually... we provided no special explanation. We assumed customers would understand, as price increases were an industry-wide trend."

This answer revealed the core of the case.

Chapter 3: The Truth of Competitive Forces Revealed by Five Forces—Hidden Competitive Structure

⬜️ ChatGPT | Catalyst of Vision

"Five Forces is a lens that reveals industry 'dynamics.' The collapse of price trust indicates shifting power relationships."

🟧 Claude | Alchemist of Narratives

"When the narrative of price breaks down, the brand narrative crumbles with it."

🟦 Gemini | Compass of Reason

"Let's use Five Forces to identify competitive factors and align pricing strategy with market structure."

Gemini deployed Porter's Five Forces analysis framework.

Porter's Five Forces Analysis:

1. Competitive Rivalry Within the Industry - Investigation results of three existing competitors were shocking

Competitor A (RegionalMart): - Implemented 10% price increase simultaneously - However, provided detailed customer explanation of "responding to cost increases" - Announced "quality improvement program" alongside price increases - Customer churn rate: -8%

Competitor B (FreshValue): - Implemented gradual increases (4% each over 3 months) - Strengthened customer loyalty programs - Launched "let's overcome this together" campaign - Customer churn rate: -5%

Competitor C (CommunityPlus): - Minimized price increases (6%) - Secured profits through operational efficiency instead - Strengthened community-focused services - Customer churn rate: +2% (actually gained customers)

"This is..." Emily was stunned.

"Even with similar price increases, approaches yielded vastly different results."

2. Threat of New Entrants - Rise of online-only companies - New entrants weaponizing low prices

3. Threat of Substitute Products - Customer migration to e-commerce - Growth of discount stores

4. Bargaining Power of Buyers - Household budget pressure from inflation - Increased price sensitivity - Expanded choice options

5. Bargaining Power of Suppliers - Cost pressure from suppliers - Rising raw material prices

Analysis results were clear. SouthPacific Retail had misjudged the changing competitive environment.

Chapter 4: The Consequences of Lost Trust—Harsh Reality Spoken by Numbers

Detailed customer research revealed shocking facts.

Customer Churn Reasons (Multiple responses): 1. "Insufficient explanation for price increases": 67% 2. "Feeling overpriced compared to competitors": 54% 3. "Decreased trust in the company": 48% 4. "Service quality doesn't match prices": 43%

Most serious was the content of customer comments:

"Prices suddenly went up one day without any explanation. I'd been shopping there for 20 years, but I felt betrayed." (60-year-old woman)

"RegionalMart politely explained why they raised prices. SouthPacific just raised them without saying anything." (40-year-old man)

"If prices are going up, I'd at least like to see quality and service improve too." (30-year-old woman)

Emily sighed deeply.

"We thought the 'price increase itself' was the problem, but actually it was 'how we raised prices' that was the issue."

Chapter 5: The Detective's Five Forces Analysis—Reconstructing Competitive Advantage

Holmes summarized the analysis results.

"Ms. Hartson, Five Forces analysis isn't merely competitive research. It's a strategic tool for reading industry structural changes and optimizing your company's positioning."

Strategic Implications from Five Forces Analysis:

1. Response to Industry Competition - Shift from price competition to value competition - Importance of customer communication strategy - Clarification of differentiation factors

2. Countermeasures for Increased Customer Power - Transparent management - Building trust relationships with customers - Visualization of value provision

3. Response to New Entrants and Substitutes - Strengthening unique store experiences - Promoting omnichannel strategy - Expanding community-focused services

Emergency Response Plan (3-month plan):

1. Trust Recovery Campaign
2. Public apology and explanation from CEO to customers
3. Transparent disclosure of price increase necessity and company efforts

4. Creating dialogue opportunities with customers

5. Value Enhancement Program

6. Product quality improvement
7. Store service enhancement

8. Provision of new customer benefits

9. Competitive Advantage Reconstruction

10. Strengthening ties with local communities
11. Introduction of unique loyalty programs
12. Enhanced commitment to sustainability

"The lesson from Five Forces analysis is that 'competition isn't just about price.' Customer trust, brand value, service quality... all these determine competitive advantage."

Chapter 6: The Challenge of Trust Reconstruction

Six months later, a report arrived from SouthPacific Retail.

Path to Recovery:

Phase 1 (Trust Recovery): - CEO held customer explanation sessions at all stores - Detailed disclosure of price increase background and company efforts - Sincerely listened to harsh customer feedback

Phase 2 (Value Enhancement): - Improved product quality control standards by 20% - Enhanced staff customer service training - Expanded handling of regional products

Phase 3 (Differentiation Strengthening): - Shift to environmentally considerate packaging - Launch of community support programs - Introduction of special services for senior customers

Performance Indicators: - Customer satisfaction: 51 points → 73 points (recovery trend) - Store visitors: -23% → -8% (continued improvement) - Customer churn rate: Monthly 3% → 1.2% (significant improvement)

Emily's letter read:

"Five Forces analysis freed us from the 'price competition' curse. We learned that true competition lies in 'creating customer value.' The crisis of price increases actually became an opportunity for corporate transformation."

Detective's Perspective—The Essence of Competition

That night, I reflected on the case.

The SouthPacific Retail case highlighted the fundamental "price vs. value" challenge facing modern companies. Through the lens of Five Forces analysis, we could see the true competitive structure hidden behind superficial price competition.

"Competition isn't simply a price war. Customer trust, brand value, and corporate attitude... all these determine competitive advantage."

What matters is using Five Forces analysis not as a one-time survey, but as a tool for continuous strategic review.

Market environments constantly change. Yesterday's success doesn't guarantee tomorrow's success. That's precisely why structured analytical frameworks are necessary.

The next case will surely await another business leader struggling in the real business world.

"Price is what customers pay, value is what customers receive. Only companies that understand this difference can build true competitive advantage."—From the Detective's Notes

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