In late 2001, Kimberly-Clark Corporation, which manufactures Huggies, the top selling disposable diaper, quietly launched a plan to raise the price of its product. It left the price of a package of diapers unchanged but removed one diaper from each package, thereby effectively increasing the price per diaper by 5 percent. The company anticipated that Procter & Gamble, the manufacturer of Pampers and Luvs disposable diapers, would react by increasing its diaper prices as well.
Instead, Procter and Gamble responded by launching an unexpected price cut. P & G reduced the price of Pampers by 15%. It also arranged with the supermarket chains to provide purchasers of Huggies with coupons offering $5 off their next purchase of disposable diapers- as long as they were Pampers instead of Huggies.
At the end of this great price war consumers were happier and so was P & . K-C's share of disposable diaper sales went from 46 to 43% and P & G went from 33 to 38%.
(Miller, 2006)
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