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Recession Tactic 101 – Do Not Reduce Your Pricing!

September 19, 2011 by Frank Goley, Business Consultant

Business Success Guide

Well, it is great to get back to blogging after a long absence. I have been waiting on our new website and blog to be done before getting back into regular blogging. And now they are done! Let me know what you think about the new look and content.

This recession has a lot of companies questioning their tactics and pricing. Question your marketing and tactics but not your pricing. All too often I see companies who are experiencing less business reduce their prices. This is often a fatal mistake. The answer is not price reduction!

In particular, I have seen construction industry companies slashing pricing, thinking that is what is needed to get business in this recession. All too often they find this makes it worse with no end in sight. If you have a good price for the value you offer for your product or service, either leave it alone, or even increase it. Yep, I said price increase in a Recession! (and I am not crazy)

Pricing is often just a part of a very complex picture of a company’s success. There are so many other factors to consider in relation to and outside of pricing. Things like efficiency, cash flow, profitability, employees, management, etc all have to be considered, and the business needs to be comprehensively analyzed as a whole (sum of its parts) to come up with a viable recession strategy. Just cutting pricing and thinking that will help you turn things around in a recession will fail 99% of the time.

So what is the Answer in this Recession?

Two part answer:

1) Do a full Business Analysis and get an accurate picture of the health of your business and how the sum of the working parts of the business are working well, or not well together. With the analysis complete, you know where you are as a business- it a point to work from. Make improvements where you can based upon the results of the analysis, and most importantly, track the results of your changes and improvements over time. Tracking and tweaking along the way is critical! Also, fully establish that your pricing is in alignment with the value you provide– if it isn’t, fix that upfront– yes, increase pricing if necessary!

2) Improve Your Marketing: The answer in a recession isn’t price reduction but better marketing to a target of your best customers. You need to define who are your best customers, and how to market to them. The smart and successful companies in a recession expand their marketing budgets, not reduce them.

Pricing

Think of ways to package and combine products and services (and add ons) that offer substantial value to your customers, yet are highly profitable to you as a company. Then market behind those key product and service bundles/packages. Pricing strategy and marketing are one and them same– take each into careful consideration and devise a strategy that encourages maximum marketing ROI for “x” price component.

Marketing

Two words: Internet Marketing. Two More Words: Inbound Marketing. You won’t find a lower cost marketing method (if done right) for a higher ROI anywhere. The bottom line with any marketing campaign is to have your phone ring and boost sales. Why have mostly outbound marketing? It is expensive and often not very effective (low ROI). Inbound marketing is superior. Here are the keys to good Internet Marketing:

  • Do Your Research: This is a critical first step.
  • Develop an Online Marketing Plan
  • Website Overhaul: Your website needs to be a sales director, not a brochure! Good Website Design and Marketing are one and the same.
  • SEO: onsite Search Engine Optimization and offsite SEO Strategy.
  • PPC: Pay per Click is only effective and affordable if combined with a strong SEO strategy. Good SEO significantly reduces PPC costs and makes PPC much more effective.
  • Video: Having video on your website and a YouTube Channel set up is critical. Get your videos professionally done– try to resist doing it yourself. Have a good SEO and Social Media strategy behind the videos.
  • Offline / Traditional Marketing: Only use in conjunction and in support of your Online Marketing strategy, not the other way around. Online marketing reduces your traditional marketing costs and makes it more successful when done correctly.
  • Track, Track, Track and Tweak, Tweak and Tweak: Online marketing is awesome with all the software you can use to track the success of your campaign. The software will guide you in changes to make to increase both conversions and ROI.

Final Thoughts

The danger with a “lowering the price strategy” is you cheapen your brand and value, only making the hemorrhaging of cash and profits greater in the long run. Even worse, you may start a pricing war which often ends in disaster. Get the health of your overall business right, ensure your pricing matches the value you offer, develop out of the box pricing packages/bundles, and most importantly, spend your money and time on Internet Marketing, not traditional marketing. Does this sound like a tall order? It can be if not done right. Consider hiring an experienced business consultant to help with the business analysis, business recommendations, business changes, pricing strategy, and marketing strategy. If the business consultant is worth his or her salt, it is money well spent and vey easily recouped. Find a consultant that is results based!

Posted in Business Internet Strategies, Business Marketing Strategies, Business Recession Tactics.

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