Why Recession Fears Shouldn’t Usurp Price

August 22, 2019 Team Zilliant

It can be hard to avoid talk of inverted yield curves or decelerated growth each time you turn on the TV or log on to your industry web site of choice. You’re probably also feeling the pressure in the real world of your own business more frequently. Whether driven by tariffs, a decrease in demand or market uncertainty, B2B companies have been put on alert across the globe that a recession could be coming.

It’s important to remember that maximizing value through price is not simply a luxury to be enjoyed during boom times. It’s just as important a tactic in a down market, if not even more so. When revenue is dropping, it’s natural for investments in pricing to come under scrutiny and for sales to start over-discounting in an effort to preserve revenue and volume.

Dropping or avoiding critical investments in pricing reactively is a fool’s errand. What does a rational business do, then? We humbly recommend sticking with your pricing approach and making some adjustments to your game plan. 

Here are some strategies we’ve seen work over the years in turbulent times…

Stay in sync with leadership
Pricing must work more closely with the executive team and sales leaders to monitor demand and competitor actions. Make sure the threat is real before taking drastic actions. If there is a threat, remember the built-in advantages your price optimization investment affords you, such as price elasticity measurement. Find creative ways to spread around a mix of price decreases AND increases where the market will allow.

Adjust pricing rationally
If you are a Zilliant Price IQ customer, you probably lean heavily on the Strategy Interface in a down market. This tool allows you to make rapid and rational changes to prices from a position of strength by toggling your revenue vs. margin goals without giving away the store. If there’s a sudden change in the market or a strategy isn’t working the way you expected, you can change things up just as quickly. Also remember, you don’t have to rush to follow the market – especially if you’re a leader in your space. Work hard to prevent desperate pricing in the markets you play in.

Don’t forget deal envelopes
Remember there’s a reason so much thought was put into Start/Target/Floor prices within each microsegment when you set up your optimization solution. Keep a plurality of deals in the healthy range by rigorously adhering to your exception approval process. There will always be overrides, but in tough times there is a tendency for more exception requests to come in, and at ever deeper discount levels. Make sure there is a protocol in place. 

Share the savings
Take advantage of cost pass-through capabilities that let you share cost declines with your customers. Be careful here and only take this approach as needed to prevent volume loss. Remember these strategies can vary by product family / customer type, and thus shouldn’t be done in a blanket fashion. You need every basis point of margin you can get. 

Keep your price optimization tool close
Like any valuable application, price optimization carries a cost. A down market puts costs in the crosshairs. We get it. But the strategies we’ve outlined here are crucial to making it through the fire and they can’t be consistently or rationally executed in a manual fashion. Price optimization drives ROI, even in turbulent times.

 

Interested in discussing these strategies in greater detail? If you are a current Zilliant customer, contact your Customer Success Manager. If you are interested in learning more about how we help companies price profitably, even in down markets, get in touch with us here.

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