No matter what services or products you sell, you have probably been affected by the current economic consequences of the Covid-19 pandemic. One way or the other. The question “how to make it to the other side” is a very hot topic and talked about in several different forums. There are many aspects of what a business should do to adapt to this new landscape. Adjusting pricing strategies is one of them.
Epicenter member Avrogan are providers of operational consulting expertise within business strategies and technology solutions. Luckily for us, pricing strategies is one of their main fields. And for this blog post, we’ve turned to them to get a better understanding of pricing in times of uncertainty.
Unsure of how to adjust your pricing model? Well, here are some tips on how to think about your pricing strategies and how to manage the cash flow pressure in these times.
Before you start thinking how much to change prices, try to put the situation into context by reminding yourself two topics:
Having these two points in mind, let’s see what you can do in these times. We got three tips here:
While economic pressure and uncertainty put extra stress on your business, remember that it is most likely the same situation for your customers. It’s a good time to invest in your business relations. So, your first task is how to provide extra value for your customers while you keep the price constant. First step in your strategy in managing hard economic situation should be avoiding discounting. Instead, increase the value perception by providing extra scope of services for the same price. Of course, you should be mindful of the cost of those services. Be transparent to your customers and communicate that it is extra service to make sure they are going to pass this time smoother. After all, their success is your success!
While you do this remember the two contextual points: After this time, you are in better relationship with your customers, and your perceived value is higher than today. It gives you greater business opportunities and price adjustment flexibility with better margins.
Ok! Of course, in some cases a big value for some segment of your customers in crisis is to lower their costs doing business with you, and at the same time for you to keep the business going.
In such cases you might consider reducing prices; but then you need to do it in a very mindful manner. Communicate price decreases as time limited offering, and always communicate the original prices. If you can combine the discounting and bonuses, go for it!
Remember, you are discounting to keep the business going. For that you need to drive behaviour and measure the performance of your discounting program. Bonuses are good to give back the value after you make sure you also receive the value you are expecting from providing lower prices.
Again, be consistent and transparent in the cause and program. Most important asset here is the trust and the perceived value; and you preserve them with right communication.
Keep finding ways to have closer and more frequent talks with the customers. Online of course! 😉
You might get surprised how much you can learn about day to day concerns of you customers by having close relationship with them. There can be many new ways you might be able to help them. For instance, you can think of temporary changes in production line, delivery times, availability of services or products, or even sell more in terms of services or service contracts than only products. You might even be able to find new segments to offer your products and services where your capabilities can help them in times of crisis.
Times of economic uncertainty are also good times to rethink the business processes and models. Try to be part of that journey of customers while you are thinking about yours too.
While you try to provide your offering through new channels, you will get away from sabotaging your current business and pricing strategies. This not only help you in long term to develop on your new business models and invest on your value perception, but also you create stronger customer trust and relationship by being on the front line of top valuable business partners.
While we’ve tried to provide some general guidelines here on how to manage your pricing during hard times, we know that not all guidelines match with every business model. We would be happy to talk to you what kind of business and pricing strategies can help your business in these times. Fill free to contact us to discuss it further.