Nearly every global leader now faces an economic crisis on top of a health emergency. The pandemic forced the government to temporarily shut businesses down, declare a nationwide lockdown, and stop any movement to and from the country and the difficulty in pricing. Thus, resulting in an economic fallout that is still evident until now, even when quarantines were lifted, and a new normal ensues.
Every business is now going through a hard time—the crisis brought about profound changes in the business industry, especially in demand and pricing.
Various enterprises experienced sharp drops in demand, leaving them with excess production capacity and negative cash flow. While in other sectors, demand had immensely risen to the point that it put pressure on product prices to increase. Customer behaviour had also changed. Many are asking for discounts, renegotiating contracts, and jumping ship to the most cost-efficient goods they see.
Fear and panic cause many companies to make aggressive pricing decisions that will result in their downfall over time. They are also under pressure to earn cash and protect the livelihoods of their employees, while also making efforts to support customers.
So, what do you need to do?
Amid the worst economic crisis, here are some business pricing advice and considerations that will help you navigate the uncertain path of this pandemic-driven tragedy.
1. Lower Prices Gradually
Massive price slashes will negatively affect your profits and branding, especially if you offer expensive goods and services.
Some companies are quick to cut product cost in response to decreasing demand. However, that will not guarantee a spur in a meaningful market nor an increase in clientele. It will more likely result in one of these three things:
- Sudden price decrease will cause clients to undervalue the products and services you offer.
- Buyers will simply stock-up on lowered price products, causing you to steal future sales and earnings. Thus, making profitability fleeting.
- Lastly, you may have to stick with a low price permanently, even after the economic recession.
The best thing to do is to maintain price discipline by either keeping product prices or gradually lowering them. Do this without compromising quality and ensuring that the business will still get enough profit to sustain its daily operations.
2. Focus On What Your Customers Value
Now is the best time to nurture loyal clients for they are the biggest driver of your earnings. Tune in to their purchasing behaviour during these trying times. Look into what products they are into, their pricing preferences, and the changes in their purchase volume.
Through these data, you can gauge if there is a need to change or improve in your pricing strategies and standard.
With this knowledge, you can adjust incentivized prices, offer add-on elements instead of increasing product cost, and shift package sizes or product mixes based on customer’s preference. Think of ways to implement such things without increasing your cost base.
3. Shift Sales To Digital Channels
Since the UK is still implementing a strict stay-at-home order (save for essential errands and activities), many people are choosing online transactions than the traditional brick and mortar sales transactions.
Several businesses, including your competitors, have also jumped in the eCommerce channel to reach and broaden their audience, as well as cut administrative expenses.
Switching to digital channels may even prevent you from making price changes due to it being convenient and cost-efficient. Many consumers are also willing to pay more for a fast and easy transaction with instant pricing information.
4. Resort To Need-based Pricing
A need-based system is a pricing structure where price setting depends on the consumer’s perceived value or need of a specific product or service.
Remember that consumers are also experiencing economic fallout, making them hesitant when it comes to spending. To cater them, you can adjust your pricing so clients can work it into their budget.
Give priority to critical services or products (medical items, home essentials), and lower the price of items which are less valuable in today’s time. This method benefits both companies and clients’ budgets.
5. Cut Prices For Loyal Clients
Generally, lowering product charges is terrible for business. It can affect your brand voice and would seem like a desperate attempt to keep the company afloat.
However, you can still opt to do it to help struggling clients during the recession. You can offer long-term clients with temporary discounts, freebies, or invoices that can be paid in instalment basis.
Remind them that these reduced prices are your way of helping them during tough times. This will not only solidify your relationship; it is also a way for your loyal consumers to market your brand by word-of-mouth.
Considerations In Pricing Changes
Before making drastic changes, consider some significant factors that can guide you in making smart decisions.
- Stick To Your Data
Uncertain times call for foundational resources such as a stable and accurate source of business metric and data to guide you in pricing decisions.
Before making monumental changes, look first into your business data such as prices, demand, margin, and volume. Evaluating your data gives you an actual picture of what your revenue looks like. It also helps in doing forecasting to avoid pricing missteps in the future.
- Evaluate Your Products Or Services
Does your product become more valuable or less? Determine which product or service is essential and focus on them in terms of production, marketing, and sales. This way, you can cut unnecessary cost and prioritize a product or service that has a significant return on investment.
This also applies to the temporary closing of underperforming branches or store locations. Focus on your primary store that has the broadest market reach, and the capacity to bounce back once all is back to normal.
- Seek The Help Of Professionals
You can employ the help of your seasoned accountant or financial analyst to help you implement strategies based on accurate business data. Annette & Co. always has its doors open for you in case you are in need of professional help.
You can also opt to choose artificial intelligence to help you in pricing strategies. There are now advanced predictive analytics and machine learning that gives real-time intelligent pricing advice.
If you want to learn more about the discussion of cash flow problems and cash management, you can get in touch with Annette & Co. for FREE business advice. Better yet, you can tune in to my Podcast – Uncover Wealth Radio – where I talk about the latest updates on UK Businesses. You can also join my exclusive Facebook group that talks about a lot of business matters and UK businesses.