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Recession Pricing Do's and Don'ts
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By Reed Holden, DBA, and Mark Burton |
Pricing during an economic downturn or recession is tricky. Too often,
companies simply cut prices to attract more sales. The right pricing,
however, can help a company compete and even thrive during difficult
economic times. Here are some pricing do's and don'ts for a recession:
DO:
* Define the value you offer to your customers. Any
knowledge of the value you deliver to your customers gives you greater
control over, and confidence in, your pricing. Interview your customers
to find out how they view your products and services.
* Create a range of low- to high-value offerings. Bundle
your products and services--and establish price accordingly--which
enables you to appease both cost-conscious and value-conscious
customers without cutting prices.
* Control company costs and reduce inefficiencies.
Streamlining your company's processes and expenses is good for business
in any economy. Reducing prices to generate more sales will not improve
your business in the long term.
* Invest in innovation to offer
something unique. Funnel funds into R&D so you have new products
and services that give you negotiating flexibility with customers and
sales growth. Innovation gives you an edge when customers are
seeking something new to lift up their own financial prospects during
an economic downturn or when coming out of one.
DON'T:
* Discount your products or services in order to compete. Getting
into a price war with your competitors--without adjusting the value of
the product or service--will just send you and your competition
swirling into a downward pricing death spiral where no one wins.
* Reduce prices on your high-value products and services.
During a recession, a better strategy is to keep high-value products
priced appropriately, but focus on selling more low-value products and
services...
continue...
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