Recession-Based Pricing Strategies Probably Shouldn’t Include Discounts
With the economy tight these days it’s not unlikely that your business is a bit slow. Consumers are pinching their pennies and cutting back here and there as gas prices continue to hit record highs. But you still have a quota to fill, inventory to move, and sales to close.
If you’re like most companies today, you’re discounting your prices to accomplish your revenue goals. But according to today’s Marketing New Radio Show guest, that may just be the worse thing you can do. In fact, he believes there is a recession-proof pricing strategy with a longer, more profitable view.
Joining me on the radio today was Reed Holden, a leading authority on pricing strategy, and co-author of the book Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table. He is also cofounder of Holden Advisors, a firm working with Global 1000 B:B companies on their pricing strategies. I asked Reed to share insights on how to approach pricing in turbulent times.
First and foremost it’s important to emphasize the amount of money being left on the table due to improper pricing models. Holden indicated that he’s commonly seen increases in profits of between 50-60% when the right strategy is used. “Discounts have become the crack cocaine of management today,” said Holden, indicating the number one reason for companies not capturing all the dollars their products are worth. In fact, he highlighted two key recession strategies we should all be considering: 1) protect your profitability and don’t under price your products – chasing after revenue never works; and 2) introduce lower value, flanking products and services to shore up your higher value offerings – this still gives customers a chance to buy.
Tons of great stuff in today’s show: pricing against the competition, elements of a strong pricing strategy, and even something you can do today to begin your own improvement process.
-- David Kinard, PCM
