Six Pricing Strategies In The Market Downturn

In today's challenging economic environment, in order to maintain the best balance between sales and profit margins, we have assembled six pricing strategies.

　　 Monitoring sudden changes in price structure

Enterprises should always be vigilant. Monitor The pricing policy changes will be reduced, such as total discounts, rebates and cash discounts, as well as service costs, including freight and sales support fees. In the current economic downturn, sustained rising costs and declining prices demand These factors may cause more violent and rapid changes than before. For example, soaring fuel prices are putting great pressure on delivery costs. Declining demand means that some customers may still enjoy the total amount they should not enjoy. Discount? 。 Companies adopting best practices are more frequently checking how much profits they can actually get from each transaction and adjusting their pricing policies accordingly, for example, increasing the fuel surcharge for each single order. In today's economic downturn, if we do not pay close attention to the pricing policy and respond quickly, the loss of revenue in every aspect of the transaction will quickly swallow up the profits of the enterprise.

　 Monitoring profitability at the customer level

Enterprises should use transaction level data to accurately measure the profitability of each customer. Through this assessment, enterprises can find that the cost of service for special customers or whether the declining orders are approaching those below the target profitability level. For example, in this economic downturn, many customer groups are shrinking and the cost of services is increasing. An industrial enterprise has found that more than 20% of its customers' profitability has fallen below the break even point. This forces the company to selectively increase the product price and, if possible, reduce the cost of customer service by reducing the frequency of delivery, reducing sales support services, or obtaining orders through other channels.

　　 Adjust according to changing customer needs.

Economic downturn always drives customers' needs and the level of profit they estimate when choosing suppliers. The development trend of the current economic downturn indicates that this change may be more rapid. In this economic environment, the best companies are constantly assessing the economic situation and changing their customers through market research and direct contact with customers. More importantly, they are making quick responses based on this assessment and readjusting their prices and earnings expectations. For example, a plastic resin supplier developed a fast curing resin during the economic boom (aimed at increasing the capacity of injection molding machine), and now developed a resin with lower cost but slower curing speed. This new resin product helps to reduce the cost of the supplier's customers, because in the economic downturn, the injection molding machine does not need full load production. Because other resin suppliers have increased the price of products, many resin manufacturers regard this slow curing resin as an attractive alternative product. As a result, the resin supplier can maintain a good profit margin even if it sells this substitute resin at a lower price. In the current economic downturn, under the joint action of lower demand and higher input costs, it is urgent to adopt such adjustment measures in order to maintain a proper balance between cost and profit.

　　 Update the results of price sensitivity research

The sharp rise in energy and food prices has made consumers more sensitive to the prices of various products. Every increase in daily necessities, such as food and fuel, will reduce some of the disposable budget expenditures, thereby raising the price sensitivity dramatically. Market price monitoring results will become obsolete in just a few months. Therefore, in order to get the correct price data, price sensitivity research and market price monitoring should be carried out immediately to track these changes in time.

　　 Monitoring the microeconomic situation of the industry

Sharp changes in cost and demand have made the previously predictable market pricing mechanism chaotic. In order to make the right response, we need to have a deep understanding of the micro economic forces that play a role in the industry. For example, a building materials company found that with the deepening of the economic downturn, its position is becoming precarious: the sharp decline of the US housing market means that the demand for building materials is shrinking, while the cost of raw materials, energy and transportation is rising rapidly. In response, the company reassessed the microeconomic situation of the building materials industry and analyzed the latest supply, demand and cost dynamics in detail. According to these new information, the management of the company has cut down the capacity of a factory located in a certain area, because the reduction of supply in the area will not cause a shortage of local market. A year ago, reducing production capacity almost had no effect on the market price, and now the production reduction can better balance the supply and demand, and it is estimated that the market price can be maintained at a level of 10% higher than that of no reduction.

　 Study your suppliers

The extreme volatility in this economic downturn requires enterprises not only to reconsider the microeconomic situation of their industry, but also to study the microeconomic situation of their suppliers. Recently, a special-purpose chemical enterprise set up a dynamic model for its main raw material supply, demand and cost investment in the near future. Using this model, the enterprise predicted 3 months ago that the raw material will increase 15% in the whole industry range. This prediction is significant because over the past 6 years, the raw material has never risen more than 5% annually. The chemical company began to increase the price of raw materials, including the price of raw materials, after signing up for contracts with its customers. If the price increases are announced, it will be strongly opposed by the customers. Before the announcement of price rises, the provision of price increases for raw materials was added, which initiated a precedent for transferring costs to customers.