There are more than a few things to consider when preparing your business for a recession. With money being tight for many consumers, pricing should be high on your priority list.
Why Not Just Lower My Prices?
Quite often, the knee-jerk reaction to hearing that people have less money to spend is to entice them with lower prices. That isn’t necessarily wrong, but you have to be careful and do it right.
Don’t Do It Too Quickly
If you cut your prices by too much in a short amount of time, it can make a serious difference in how consumers perceive your brand, and not positively. A drastic price decrease usually indicates one thing to them: the quality and value have also gone down.
Do It Right
Instead of permanently dropping the price and running the risk of devaluing your brand, there are better ways to pass savings to your consumer:
- Create bundles of your most popular products or services
- Work with others in your business community to create cross-promotions
- Offer temporary promos or discounts.
- Find ways to internally cut costs, and pass those savings onto your customers.
So, I Should Increase My Prices?
A pricing increase is a normal part of business, especially if you’re offering a service and not a product. Here’s why:
You are currently offering a service for $100 a week, but have hit your capacity. You can’t possibly take on any more work (without standards falling), so you double your price. Half of your clients leave, but the other half are happy with the value you offer at the new price. You just opened up a ton of time and didn’t lose any profit.
More Time For Each Client
As the example above shows, increasing your price can lead to more commitment from the ones who stayed. As long as you’re bringing them value, they’ll be happy to stay.
Check Out Another Blog: Recession Marketing: It’s Time To Double Down
Just as a price decrease can harm your brand, a price increase can actually do the opposite. Now, don’t misconstrue this as just hiking your prices up to whatever you feel like. You have to be smart about it.
A good example of this is a restaurant that increased the price on a certain bottle of wine by 80%, which led to an increase in sales. However, when they increased it by 200%, sales went down. It’s a balancing act!
Know Your Consumer
Every consumer is different, and people who are cutting coupons at the grocery store are not the same ones who are buying Rolex watches. You know your business and should know your consumer. When it comes to pricing, an increase might work for one brand , but not another.
Why Not How
The entire point of this blog is to stress the fact that no single answer is correct. Every business has unique needs, consumers, factors, and more. This isn’t a list of points to teach you “how to think”, it’s to show the importance of “why to think”.
It’s more work, but it’s your business!