Pricing to the bottom – not a good marketing strategy in recessions.

Pricing to the bottom – not a good marketing strategy in recessions.

Effective marketing is going to be a truly vital tool for many businesses coming out of lockdown and resuming trade. However, we want to warn now of the potential dangers of one of the aspects of the 5Ps of marketing. (We know that some smart folks espouse that there are indeed 7 or 9 or even 12 but for now we will stick with 5)

• Product
• Pricing
• Promotion
• Place
• People

Is the price right?

Before you think about slashing any prices in an effort to win customers, have you calculated what price you need for your product or service is priced to cover wages, materials, production, overheads, indeed all costs associated with the business. Does it make enough money? Does the market price allow you to add enough profit? Without a profit you have nothing to re-invest. Get the calculator out and work it out before you do anything.

If the price is not high enough you need to Raise the Price and /or Reduce Costs. Can your market stand it? Knowing how high and how low you can go is essential for the coming months. Do you keep a close eye on your competitors? Be aware of what they are doing but don’t necessarily follow if they head on a downward trend. They are not being as smart as you.

Another way to approach this is to consider your offering.

If you are in the stack ‘em high, sell ‘em cheap marketplace then it’s a quick win situation you are looking for with the ability to swoop in with another stack ‘em high, sell ‘em cheap product when the novelty of the first one wears off.

But if quality and performance are your cornerstones then now is the time to tell your customers this and then price becomes less of an issue. It’s a stark fact but if someone wants ‘cheap’ they will take cheap, no matter what you do but they are much less likely to be loyal customers – they are always chasing the bargain. So, with that in mind, reward your loyal customers NOW. Say thank you and show how much you appreciate them.

Loyal Customers

And talking of loyal customers, are you marketing to your existing client base? They already know and like you or they wouldn’t still be with you. Did you totally delight them the last they engaged with you? It will be much easier to sell again to them that chase new customers during recessionary times. Don’t forget to ask your loyal and best customers for referrals too. Reward them for a good referral.

My product or service

“Ah!” you say “but my service or product to my existing customers was a one off buy” Nothing is ever a one off buy; there will be something you can upsell on the back of your main offering. Perhaps it’s time to think outside the box a little but not too far. Could you offer an annual review to check all is OK or indeed they are up to date? How about an extended warranty or introduction to a new enhancement. ? There will be lots of things you can do to enhance your offering. Sometimes it just needs a big piece of paper, a pen and time stand back and reflect to get the creative juices going.

Tell loyal and potentially new customers

Now is the time to review your methods of communication having reviewed the previous 4 items. Email still works and GDPR doesn’t mean an end to this. As a business you can easily market to existing businesses and to your client list. If your client list are individuals you should make absolutely certain you do have their permission though. No matter what method of email marketing you consider always remember to include an easy opt-out. Hey, maybe snail mail might be good. Slightly more expensive but when properly targeted with great content it can work.

Of course, most businesses now think that Social Media is the answer to everything. Not so but it can help hugely depending on your target audience. You do know who your target audience are? Do look at a variety of ways of communicating your message. Don’t forget your digital assets as well.

Take time, think it through, speak to a marketing professional, get help and think of this aspect of your business as a long term investment and not the initial expense you think it might seem. Don’t forget, we’ve seen thousands of businesses over the years through good times and bad and we are here to help, advise and sometimes just listen.