Evans on Marketing has written about pricing about 130 times. All pre-COVID 19. But, it is important to discuss pricing and the COVID-19 crisis. For many B2B and B2C customers, price is a key buying factor.
What Marketers Should Do: Pricing and the COVID-19 Crisis
Pre-COVID-19, marketers faced a strong economy. Thus, they could pretty much use the pricing strategy they felt best. These days, pricing decisions are more complex.
As McKinsey’s Alex Abdelnour, Todd Babbitz, and Stephen Moss observe:
Demand is volatile, creating various pricing challenges. Firms focused on long-term value rather than short-term gain are best positioned. Many customers want discounts and contract renegotiations. Some competitors are aggressively pricing. For others, demand has risen to unanticipated levels. Putting upward pressure on prices. Firms must sustain value to survive the crisis and protect employees. They must also be flexible and creative to support customers.
Five things to get right during the pandemic:
1. Make sure every pricing action is legal, ethical, and community minded. A humanitarian crisis is not the moment to sharply raise prices on essential goods or services or to ignore contracts.
2. Take a through-cycle view of customer relationships. Keep a long-term perspective. Reinforce trust by tracking key customers’ evolving needs and standing by and defending them during their toughest times. Help the sales team tailor offerings and contracts to new situations and strengthen value-based communication. .
3. Strengthen value-focused messaging. Depending on the industry and customer segment, customer price sensitivity may change markedly. The most effective suppliers will show empathy and be able to explain how much value they provide compared to the next-best alternatives.
4. Create ‘flex’ in pricing. Outperformers will address customers’ short-term pain points without destroying long-term value. This means temporary pricing relief. Rather than lock in long-term high discounts, they will explore ways to unbundle offerings. And offer one-time promotions, flexible terms, credit for future purchases, or other techniques to adjust pricing to near-term needs while providing future flexibility.
5. Establish a commercial ‘value council’. A cross-functional team can take a long-term view to avoid panic reactions and develop clear guidelines and objectives. It can steward large and strategic deals and oversee execution. Thereby speeding deal review for impacted segments and maintaining discipline.
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