How to Price Discount Your Product During a Pandemic

I read an article recently that was suggesting ways for businesses to price-navigate through the next 3-4 months. One suggestion was to avoid discounting your product (I am taking comment out of context so won’t source it) and while I wholeheartedly agree with this sentiment - as a value based pricing strategist - when we are not spiraling into a pandemic-caused recession, I can’t bring myself to reason that across all industries this is realistic (or even customer-centric) to achieve if we want to actually close business during an econimic crisis of times.

Here are 5 tips to “reducing price pressure” for your customers who are most impacted, without putting your own business or reputation at risk:

1. Move customers away from thinking it is a "discount" you are offering. It’s semantics, but it matters in the long run not to use this terminology on contracts because when things recover, and when you will thus try to ramp your pricing back up, coming back from a discount is one of the hardest things to achieve at renewal time without substantial investment in product or value add. So, instead of just taking a % off your current list price, develop a price list for customers in need. Call it an exercise in "reducing price pressure” and create a check-list of criteria that they must meet to receive a package that has the critical things they need to get them through this difficult time at a lower price than what they would normally pay.  Create a SKU if you can for this package, so that it is separate from your current list, and call it something different on your contract so that at renewal time there is no confusion that it was a package given during extenuating circumstances.

2. Leverage your industry segmentation. This is why we pricing people harp on about pricing by industry segmentation: you don’t need to offer the same price relief for everyone. Some industries have been hit harder than others, and some industries are flourishing. I am not suggesting you go for the jugular for those industries that are thriving, but I am suggesting they may not meet aforementioned criteria and would not qualify for packages created with price relief. Following strict pricing policy for certain industries creates a very helpful talk track for your salespeople to defend pricing reductions in some cases and no reductions in others.  Those industries impacted may need deep, deep price reductions for a period of time, but you can do it in a way that won't impact your entire book of business.

3. Give more product - to everyone. For SaaS companies - this is a good time to offer what you can by way of more product to ALL existing customers for a short period of time to help them gain more insight and transparency during a difficult period. Help people help themselves while expanding your brand recognition and reputation as a vendor who is supporting businesses with gestures of goodwill because this is of little cost to you and goes a long way in helping to build relationships for when things get better. After this crisis is over, it will leave you with a lot of customers wanting more.

4. In exchange for price relief, Barter. Ask (and put into contract) for things like: warm handovers to board members to extend business opportunities, X number of video introduction referrals, customer testimonials, lead lists from past events (where allowed), partnerships, placement on their website, speaking engagements on webinars they might be participating in, verbal advertisements, re-tweets by their C-level, pics of them using your product or service on Insta/Linkedin/their website/Twitter, etc. Find the things that do not cost them to help your business progress in exchange for letting air out of their pricing tires. 

5. Be prepared before talking to customers. Make decisions up front before talking to customers about what you will offer and when you will have to walk away for the sake of your own business. There is enough information being published daily to know the % decline by industry so you can back into calculations and to, for example, ramp up your pricing (i.e. sign a 1 yr deal, agree to review pricing every 3 months, or 1 month if they have to - and if they still meet the defined criteria, they qualify for that pricing for another month, if they don't, they revert to regular list, regular packages), to help businesses so that you both can survive and thrive. 

There are ways to price during this crisis that do not come off as ruthless or as giving in so much that you can’t be profitable now or you can't recover later. We can do it in a way that is win/win with a little transparency and creativity. Be healthy and best wishes everyone.

#pricing #pricingstrategy #pricediscount