By Kirk Jackisch, President & Fred Puech, Vice President of Pricing Analytics at Pricing Solutions

During times of crisis and market uncertainty, pricing becomes more important than ever for B2C businesses. Pricing decisions are often the tipping point between a company surviving a crisis and falling victim to it. In times of recession, market crashes, or any forms of national or global crisis, there’s often no way for businesses to avoid reduced profits; it’s inevitable. Instead, goals must shift from increasing margins to maintaining customers and from growing market share to maintaining it. Your focus in times of crisis is to survive the turbulence.

As retail stores, gyms, bars, restaurants and cafes around the world have been asked (and in some cases mandated) to shut down in an effort to curb the coronavirus pandemic, many are wondering how they will survive. Here are our pricing ideas to help your company survive a crisis.

5 Pricing Tips to Survive Crisis for B2C Companies

1. Maintain customers

Your priority should be to maintain your customers and traffic (or at least limit a decrease as much as possible). Now is not the time to try and drive margins by implementing price increases. Once the crisis is over your business can look at ways to make up for lost margins. For now, work on maintaining customers and increasing value.

Focus on frequency with your existing customers, while keeping in mind that the current environment is not conducive to attracting new customers. Instead, keep your market share by maintaining relationships with existing customers and driving frequency as much as possible (promotions are a great way to do this). Above all, avoid losing your market share because once the crisis is over your customers will have moved to the competition.

2. Maintain prices

While it’s tempting to drop prices in an effort to drive (or at least maintain) sales, we recommend against price decreases because they are rarely effective. There is a significant body of evidence, both academic and applied, that shows consumers are typically much less sensitive to a price decrease than they are to a price increase.

Price elasticity is not symmetrical. As a result, a price decrease does not drive enough volume to offset lower margins and the business often finds itself worse off. In a crisis where the market is experiencing a demand shock, it becomes even more illusory to expect volume to grow significantly as a result of a price decrease. Besides, while it’s true that during times of recession many customers have less spending power, B2C businesses that cope by dropping prices will face the challenge of having to raise prices once the crisis is over.

On the other hand, beware of increasing prices in an attempt to make up for increased costs your company may incur. Doing so could cause you to lose valuable market share. Instead, offer timed promotions and increase value to drive business from your existing customers.

3. Use promotions strategically

Promotions, traditional coupons, limited time offers and offers encouraging frequency are all very effective in helping B2C companies cope in highly volatile times. Examples include:

• A delivery service offering $10 off the next $50 order
• Using a loyalty program to target promotions to your most loyal customers with the goal of maintaining traffic while delivering value
• Gearing promotions to digital channels and online deliveries like drive-thru only promotions.

In instances where prices must go up look for ways to add value to justify the price increase. This value could be found through services aimed at convenience, and in the case of the coronavirus pandemic, by driving safety through digital-services and a shift to doing business online. Examples include:

• Handling fees for online shipping
• Pick-up fees for click and order grocery shopping.

In all of the above examples, it’s critical to make all offers and promotions time-sensitive so that your B2C business doesn’t run into the issue of having to remove a promotion that customers have gotten used to when the crisis is over. Communication becomes essential here. Ensure you communicate to customers that your offers are limited in time.

Many B2C businesses have carefully collected data around customer behavior and the effectiveness of promotions. This data still applies and in fact, many businesses will find that it will be amplified. If a promotion worked well under normal conditions, then it should work well (or better) in times of crisis.

4. Adjust how you do business

With the coronavirus pandemic, businesses have been forced to address health risks that have restricted people’s movement and forced many businesses to close. In this case, digital sales are becoming critical for a lot of operators, especially in the retail and foodservice industries. Many restaurants are offering promotions or bundles around healthy items like soups and salads, and a number of food delivery services have started offering curbside pick-up as a way to keep both their customers and their staff safe and healthy.

While the way your business adjusts will depend on the crisis itself, it’s important to take pricing into account with your adjustments. Focus on ways to maintain share and keep selling, even if it means making smaller profits.

Photo by Kerde Severin from Pexels

5. Balance social responsibility with opportunism

Depending on the crisis, some industries may find themselves at an advantage. During a pandemic, e-commerce may be the only industry that could justify increasing prices. This is especially true as online retailers cope with demand as citizens are asked to practice social distancing and remain in their homes. In this case e-commerce retailers must be careful about how they implement and communicate price increases to balance managing demand and capitalizing on market conditions. Avoid being seen as opportunistic. Ultimately whether you keep prices flat or ride the demand, we recommend maintaining social responsibility and avoid price gouging, which could create negative PR for your brand.

Get in Touch

Looking for pricing advice for your B2C business during a time of crisis? The team at Pricing Solutions is available and ready to help. Although we’re working remotely at this time, we’re fully operational and are on hand to assist our clients through this period of uncertainty.