In this recession, customers typically cut back on their spending. To entice these customers to spend and buy, one of the first adjustments you can make to survive these tough economic times is to adjust your pricing.
Adjusting your pricing, however, is not just a function of lowering your prices. You need to consider several factors, such as
- the type of products or service you offer
- type of transaction your business generates (repeat purchase, one and done, or purchase with possibility of buying a different product)
- how a lower price could affect your brand
- whether you can easily raise your prices up again when the economy recovers
- the impact of narrower margins with lower prices
- how you envision your business when the economy turns around
- how your competitors respond to changes in your prices and whether the price cut will lead to a price war
Once you consider the above factors and really think that your pricing needs to change, there are several ways you can adjust your pricing:
- Instead of cutting your prices, highlight the lower priced items in your offering and build marketing campaigns around it (e.g. feature lower priced items in your homepage). This can help you woo price-conscious customers and appeal to bargain hunters.
- Cut the prices of your lower-priced items, leaving the price of your higher-end items untouched.
- Offer limited discounts to select customers such as first time buyers to attract new customers.
- Limited duration specials to entice customers to buy and avail of the discounted prices before the offer expires (a common strategy of car dealers)
- Lower the price of items where you have some incentive arrangements with suppliers, e.g. rebates from manufacturers if you meet sales goals
- Volume incentives, offering discounts to those who purchase certain amount (e.g. 20% discount for purchases $200 and above)
- If selling a service, bundle more features into the same price so customers get more and you add more value to your offering. You can also bundle complementary products together, even going to the extent of partnering with another company (a bed and breakfast business partnering with local adventure companies)
- Add extras to your service or product — for free!
- Give customers one time coupons
- Lock your customers to longer t erm commitment, similar to what phone companies are doing where they throw in a phone for free or highly discounted if you sign a 2-year contract
Surviving this recession may sometimes mean comprising your position or taking in difficult decisions. The key is to carefully monitor how the pricing strategy you have adopted is affecting your bottomline, brand, customers perception and your position when the economy recovers.