Feedback Form
Home Features Mastermind Forums About Advertise Blog Network Contact Be An Author

Pricing in a Down Economy

Pricing in a Down Economy

What message are your sending?

 

 

In a difficult economy, the natural tendency is to lower prices in an attempt to retain as much business as possible.  Is that a good strategy?  Intuitively it makes sense; yet I’ve often found that the counter-intuitive approach - the one that is the opposite of what our natural tendency suggests - produces better results.  Does that hold true for pricing in a challenging economy?  Let’s take a look.

 

Lowering prices

We’re all buyers so we don’t have to look far for reactions to the pricing decisions.  What’s your impression when businesses you frequent lower their prices?  Have you wondered:  

  • Have they been getting in my knickers all along?
  • Are they desperate for business?
  • If I buy from them, can I count on service after the sale?
  • Are they cutting quality or quantity to lower their price?  If so, are they doing so without telling me?

I doubt that any of you want to plant these questions in your customers’ minds, yet that’s exactly what you’re doing when you lower prices without getting buyers to make concessions as well.  Let’s contrast that with companies that hold their prices in a down economy.

 

Holding prices

What impression do you have of businesses that keep their pricing constant?  Do you feel that:

   

  •  They are well aware of the value they provide?
  •  Confident in their knowledge of what their ideal customers value and that those customers are willing to pay their price?
  •  They have a strong rapport with their customers?
  •  They are successful and can weather a challenging economy without lowering prices?
  •  They’ll be around to provide service after the sale?

 

Indeed, isn’t this the message you’d rather send to your market?  What about the really confident companies - those that raise their prices?

 

Raising prices

What reactions do you have to price increases from companies you frequent?  Do you feel that these business owners or leaders are:

 

  •  Arrogant?
  •  Uncaring?
  •  Unaware?
  •  Just plain stupid?

 

Or do you find yourself paying the price anyway?  My experience has been that price increases during a difficult economy are often modest and that customers continue to buy regardless of the increase.

 

Some companies use this strategy, raising prices in a down economy, to eliminate unprofitable customers.  There’s an old adage that says “80% of your customers produce 120% of your profits.  The other 20% of your customers cost you 20% of your profits?”  In the 20 years I’ve been providing consulting services to businesses, I’ve helped many of them increase their bottom line by reducing the top line - their revenues.

 

Buying habits

While people’s buying habits change during a difficult economy, they don’t often change in ways that we’d expect.  Buyers continue to pay whatever price is asked for things they really want.  I’m sure that many of you have driven through a trailer park and seen a really old, dilapidated trailer that had a brand new $30,000 pickup in the driveway.  Or you’ve driven through an older subdivision comprised of 900 square foot homes with a $150,000 RV sitting in the drive.  Buyers spend huge sums of money on things they really want - good times or bad.  

 

If buyers are going to cut back, they’re going to do it on things they need, not those they want.  That’s one of the reasons why Walmart and Costco have fared so well in this economy.  Buyers are looking for lower prices on the necessities.  

 

Had it not been for the downturn, it’s unlikely that WalMart would have fared so well.  Why?  They’re in the midst of changing from a low-price strategy to one that’s ostensibly designed to compete with Target.  If you doubt that there’s a shift afoot, you need look no further than change in their tagline from “Always low prices, always” to “Save Money. Live Better.”  

 

I know that some of you are thinking “Yes, but buyers are also postponing purchases of what they want.”  That’s true.  My question to you is “How much do you have to discount  your offerings to get them to buy now and what does that do to your ability to recover as the economy rebounds?”  As a CPA, I am required to get forty hours of continuing education each year to keep my license active.  During a break at a CE seminar, I spoke to the presenter.  He told me that one of the CPAs in an earlier class said that his firm wasn’t going to lower rates this time.  The last time they did it took them five years to recover.  Are you willing to put that much of your future at risk?

 

For those of you who are thinking “Dale, if I don’t lower prices now I won’t be around for the recovery.”  If that’s true, and I sincerely hope you’ll challenge that belief with several trusted advisors, then wouldn’t you be better off limiting your losses by getting out now rather than adding to those losses with lower prices?

If you’re considering lowering prices, I encourage you to think about the message you’re sending to the market.  It may not be the one you intend.


 

 

Copyright © 2009, Dale Furtwengler, all rights reserved

 

 

 

 

 

 

 

 

 

 





Pricing in a Down Economy - To learn more about this author, visit Dale Furtwengler's Website.

Like this article? Share it with your friends

Article Feedback
 Article Feedback No article feedback found.
  Leave Your Feedback
article feedback

Article Feedback

To learn more about the Evan Elite Author Program please contact us.

About The Author


Dale Furtwengler
(Visit Dale's Website) Professional speaker, internationally-acclaimed author and business consultant who uses counter-intuitive thinking to help clients increase profits without adding resources.  For more information on counter-intuitive thinking visit www.furtwengler.com /theinvaluableleader/.  For business leaders who want to get higher prices for their products and services visit www.pricingforprofi tbook.com.

Dale Furtwengler is a Gold author on EvanCarmichael.com
About The Author

View Author Blog
View Author Blog

View Author Video
View Author Video

Free Downloads


Dale Furtwengler's

Complete
List Of
Small-Business-Consulting
Articles

Name
Email
If you enjoyed this article, get Dale Furtwengler's Complete List of Small-Business-Consulting Articles For FREE!

More Dale Furtwengler
Why We Overlook Simple Solutions
Making the EXCEPTIONAL Normal Part 4 The Trust Factor
Accelerating Referrals
Burnout or Boredom
A Lesson from the Unsinkable Molly Brown
Fixin to Hunt Up Some Cash
Increase Profits Without Adding Resources Part 3
When Does the Foundation Become an Anchor
Annoying Customer Behaviors
Making the EXCEPTIONAL Normal Part 5 Dealing with Difficult Employees
Free Downloads


 
 
 


Evan Elite Authors
Dianne Crampton  
Joe Dager  
Leanne Hoagland-Smith  
Evan Elite Authors

Become An Author
Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details.
Become An Author

Evan's Latest Video
Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media
Evan's Latest Video

Business Opportunities
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"

How to Start An Online Business

Click Here To Learn More
Business Opportunities



Evan's Newsletter
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
Name:
Email:
Evan`s Newsletter

Free Downloads
Franchise & Distribution Icon Franchise & Distribution
Instant Scripts Icon Instant Scripts
CAN-Spam Checklist Icon CAN-Spam Checklist
Instant Press Release Icon Instant Press Release
Your Marketing Mindset Icon Your Marketing Mindset
Free Downloads - Complete List

Entrepreneur Tools and Guides
Top 50 Raising Capital Blogs To Watch In 2008
Top 50 Raising Capital Blogs
Top Blogs To Watch In 2008
 
The Top 10 GTD Times Posts - Best Posts for Productivity
The Top 10 GTD Times Posts
Best Posts for Productivity
 
Entrepreneur Tools and Guides

SEO For Africa
SEO For Africa
Akossiwa Ahuefa Possian Adidogomé, Togo,
Akossiwa Ahuefa Possian
Adidogomé, Togo
SEO For Africa

If I Were A Startup...
Travis Hartley, 426% Growth in 2 Years
Travis Hartley
426% Growth in 2 Years
Stephen Pollack, $1.2 to $16.2 Mil in 3 Years
Stephen Pollack
$1.2 to $16.2 Mil in 3 Years
If I Were A Startup... - Complete List

Famous Entrepreneurs
W.K. Kellogg, Kellogg's
W.K. Kellogg
Kellogg's
Anita Roddick, The Body Shop
Anita Roddick
The Body Shop
Famous Entrepreneurs - Complete List

Entrepreneur Advice
Brad Feld, Venture Capitalist
Brad Feld
Venture Capitalist
Timothy Ferriss, 4 Hour Work Week
Timothy Ferriss
4 Hour Work Week
Entrepreneur Advice - Complete List

Popular Articles
(Premium Authors)

     The New Face of Business Is An Old One The REAL Secret to Excelling In Business Today
By Kim Castle
     A Point in Every Direction Is the Same As No Point At All
By Kim Castle
     Are You My Mentor
By Kim Castle

Have A Suggestion?
Toronto Salsa Classes / Toronto Salsa Lessons Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
Have A Suggestion?

More Evan Carmichael
More Information