This guest post was written by pricing and sales expert Joanne Smith, President, Price to Profits Consulting
It’s inevitable – difficult times lay ahead. Economists are predicting a recession, yet they differ on their projections of the depth and length of this recession; from a few short months and a fast recovery, to many months and a recovery that lasts until a vaccine is available.
Keeping in mind that a recovery phase means we are still in a down market – one that is on the upswing, yet still has not returned to normal times – either scenario is a long time for B2B businesses to weather.
Like the downturn is inevitable, so is mounting price pressure. It will come from all sides.
* Customer’s will demand price relief,
* Competitors may begin discounting to retain, or worse, gain share
* Management, worried about low revenue and still tied to their now unrealistic growth objectives set pre-recession, will encourage sales to gain volume
* Sales, worried about their own compensation and maintaining good relationships with their customers, will begin to advocate for price discounts.
You need to get ahead of this pressure fast. You need a Pricing Crisis Preparedness Plan as well as a sales force with the confidence and skill to navigate through these tough times. Based on my book “Pricing in a Crisis Playbook”, Your 5-step plan should include:
* Monitoring, predicting and analyzing your market and pricing performance
* Setting your proactive strategies and tactics
* Building your communication plan
* Tightening your deal approval process
* Forming a pricing crisis management team and process.
Doing nothing – waiting until the pressure has already affected your market price – is guaranteed to result in unnecessary price decline and significant loss of profits.
Consider the pricing performance of DuPont, a $30 Billion company, for which I was leading the corporate pricing organization during the 2009 great recession and the 5 years prior to this recession.
It was during this recession that I developed and deployed my 5-step Pricing Crisis Preparedness Plan– one that I have enhanced as I subsequently guided many businesses through tough times.
During the great recession, DuPont had only 2 quarters where price declined and for the full year of 2009 we netted a positive $200 million of profits – over 2008 – from pricing.
Now, let’s compare that to DuPont’s performance in much less severe times such as the 2001 mini-recession, the chaos of the 911 attack or the Asia crisis / 1997 market crash. During each of these milder market downturns, DuPont lost pricing for 5 – 7 quarters straight! We lost price through the crisis, the recovery and then some.
Clearly being reactive to the market – essentially a victim of the tough times – brought far more dire price and profit declines. Yet, when we became proactive with a preparedness plan, we were successful in influencing our performance as well as the market towards much slower price declines. As the market recovered, we were quick to take advantage of these more favorable times.
If you’re interested in learning more, refer to my new book Pricing in a Crisis Playbook: A Practical B2B Guide for Pricing with Confidence in a Crisis or Recession and hear me present at the Fall Pricing Workshops and Conference event #PPSVirtual20!
Click the image below to learn more and register.