As sure as the tides rise and fall, the next recession will spur many companies to cut their prices indiscriminately. During the last recession, producer prices fell by nearly 8% and took nearly two years to recover. Why? Executives often assume that slashing prices and profit margins is the only way to keep their customers and market share. Salespeople, desperate to make their quota, fail to hold the line on discounting, and companies want to maximize their use of assets even when demand softens.
Why You Shouldn’t Slash Prices in the Next Recession
If you prepare the right way, you won’t have to.
October 30, 2019
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Summary.
The next recession will spur many companies to cut their prices indiscriminately. Bad idea. Cross-the-board price cuts can permanently erode a company’s profitability and strategic position. By contrast, preparing for the next recession now on the following four fronts can prevent a broad-based price decline: 1) factor in their standing as a market leader or follower; 2) create tiered offerings for different segments; 2) Patch price leakage (don’t give away more than you are contractually obligated to provide); and 4) develop dynamic pricing.
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