First let me preface this blog by saying how much we detest the word PIVOT after hearing it so much during this pandemic. The pressure to PIVOT all the things has been overwhelming. Now, as businesses start to reopen we need to ..ugh.. PIVOT… our pricing structure too.
Covid-19 came in like a wrecking ball for business worldwide. As you must be pivoting now to rise up and adapt to the new normal (although it seems very far from ‘normal’), we’d like to lend you a helping hand.
The reason for the chaos in the markets is because of the erratic consumer behaviour and random turn of events. These are so unprecedented… I mean the weather seems a lot more predictable than the markets these days!.
Now, with the economy seeming to open up, things are still uncertain. Many entrepreneurs and businesses have cut down on prices to pertain to sales volume and other challenges. On the other hand, some businesses have decided to raise their prices to cover raw material (PPE is expensive!), demand or staff shortage.
These are just temporary adjustments. Is that sustainable for your business? No. You’ll need to have an adjusted pricing strategy with a better understanding of demand and your competitive position. Your business now also reflects empathy and trust in yourself and your clients.
1. Keeping A Track On Spending Trends
The most important thing that will help you determine pricing is keeping an eye on how your clients and customers are responding to the pandemic and the ensuing economic crisis.
A recent study by Nielsen, states that people are more driven to purchase health and wellness products. Their inclination towards buying perishable products has reduced as opposed to non-perishable products.
Hence, before you take up the task of redoing your pricing strategy, you’ll want to catch up with consumer trend reports frequently. Each new month brings a fresh load of news, information, speculation and regulations. Consumer trend reports will give you a clear headstart for pivoting your pricing.
2. Don’t Cut; Give More
If you are fully convinced into slashing your prices, just hear this one strategy out. A lot of companies have found an innovative way to stick to their pricing strategy but compensating by adding value.
Empathetic creativity can steer your business better with competitive prices. This would simply mean slipping in thoughtful add-ons to your product or services. For instance, restaurants delivering local beers to people’s homes, organizers creative and interesting webinars for clients if you’re in the service business, a gift card for a future purchase through email etc.
While this might seem like an additional cost to you, it will allow you to leverage your prices without cutting them. Now, more than ever, a value-based pricing model will serve you better than trying to “just cover costs” or worse..undercut the competition!
3. Play With Your Prices!
Up or down or all around… we need to understand your business and act accordingly.
Steer Away From Hiking Prices
Nope not the trail hiking, that’s really good for you. Hiking up your prices in touchy times like the current pandemic. Here’s why; during economic and medical inconsistencies, consumers and clients are on a tighter budget. They’ll hold dear every cent and more than 70% of the people would rather not buy than go for a higher price.
While it may make sense to you to raise prices to cover losses or lost sales due to uncertain times or social distancing rules, the new normal for your clients and customers will still be a soft-treading ground. They just won’t be in the spot to spend a few bucks more on your service or product.
Say No To Low Balling and Price bargainers.
One of the biggest reasons businesses and startups would now want to hand over low balled deals is because of the fear of losing out on potential and regular customers.
While that might be running across your mind, you’d actually be doing a disservice to your business by slashing prices.
Consumers will always be willing to pay regular pricing for products that they believe in, and that are safe for them and their budget.
On similar lines, although it might appear harder to find your new clients, with the economies now reopening at a faster rate, you are really in the right place to keep up with your regular prices as opposed to reducing them. And if you are approached with low ballers, you can safely refuse them, this is the time to build your business upwards.
If your business runs on annual fees or subscription, now is the best time to introduce monthly or quarterly payments. This is super appealing to those on tighter budgets but still need you.
So When Exactly Should You Reduce Your Prices?
Cutting down your prices would really be valid if you have absolutely no sales, no clients, no customers even clicking your website. That’s when you could consider combining products or discounting popular items to generate cash. This is also a great time to review your ideal client and your business proposition to understand why they are reacting the way they are to your services – but remember, some businesses had to shut down.
Discounting your services and products helps your clients to still stick with you in these tough times rather than lose you altogether.
Price reduction could be a temporary tactic and you could raise back your prices to normal as the purchasing market improves.
So… what do I do with my prices then?
This is a tough situation for a lot of business owners who are now facing the choice to re open but with added pressures. Look at your numbers… what is your new break even point given your current pricing model? Is this attainable given the current guidelines and your current demand? If no…
- Can you cover the shortfalls? Loans like CEBA, amongst others available, are meant to help you during tough times. While the world is starting to reopen we also don’t know what the new normal really looks like.
- But I don’t want more debt! If you have no choices but to raise your prices, consider a slow and gradual price hike to allow people time to catch up. Remember, not everyone is even back to work yet!
- Consider whether you want to stay in business. Ouch! I know. Yet, for some, these new guidelines and restrictions will mean that staying in business is just no longer viable.
You have a business for a reason. To make money. Understanding the sensitivity of the times is also crucial and tactfully navigating your pricing will allow you to grow.
Pricing is everything. Hence, it is really imperative to think of all possibilities, brainstorm every scenario you can, alternate-think every decision and then go ahead to build your pricing strategy in the new normal.
If the pandemic comes to an end, it would just mean less fear of being outside and buying. But it would still entail more months of people being truly free in terms of their budgets and income to be spending. It will take time to recover for the past few months of financial crisis for those impacted. Clients suffering economically right now will need much more time to stand back up after economic chomps like COVID 19.
The best strategy would be to test your markets a little at a time before full-fledgedly jumping in with a singular thought-based pricing plan. Flexibility and understanding of the rapidly changing mood and needs will help you make a solid pricing model for your business
Do you need help understanding your pricing model? let’s chat… book a call!