As the economy softens, consumer products companies are seeking to hang on their market share through a number of strategies. In the computer industry, as well as shading prices, Dell is giving free upgrades, shipping, and Internet service to on-line customers. Some models come with a printer, a scanner, or a digital camera. Automakers are giving more incentives. On average, in March, incentive spending was $2,570 per care, up 42 percent from a year earlier.

Some household products are coming down in price. Clorox reduced the prices of select cleaning goods, such as disinfecting wipes and Formula 409, by 10 percent. Procter & Gamble backed off raising the price of Bounty paper towels by 9 percent, and instead increased the price by 4.5 percent.

Cruise operators are also reducing their prices to try and fill their expanding fleets. A 7-day Caribbean cruise in January cost only $730 for a standard cabin, compared to $1,124 a year before. Likewise, the hotel industry has been increasing capacity, and is facing falling occupancy rates. Consequently, room rates are expected to rise only 3.8 percent, compared with 4.9 percent last year. In addition, fewer new rooms will be built this year than last year.

To avoid dependence on competing only on price, companies need to innovate. For example, the number of disposable cameras sold increased substantially in 2000, despite the onset of the slowdown.

(Updated June 1, 2001)