Thanks for a much needed article. Given the reality that upwards of 85% of businesses with leadership positions going into a recession...lose that position, it's clearly a key business issue.
To add to your compelling list of suggestions...here's the framwork for a Pricing Playbook we've developed...and a couple of conclusions and references.
Pricing Playbook for SMBs
• Don't Panic! Don’t automatically reduce Prices to compete… as you'll very seldom get them back again!
• Secure your customer base (eliminate churn) Understand the 4 keys: Gallup research shows that customer engagement (loyalty) is based on the strength of four basic emotional needs: confidence in the company/brand, belief that the company has integrity, pride in association with the company/brand, and passion for the brand
• Define your value
• Add value
• Bundle/Unbundle -
• Introduce new products
• Be confident in the definition of your sandbox – are you focused?
• Control costs and reduce inefficiencies
• Reduce or Push out the Pain
• Offer deferred or installment payment plans
• Respect your customers - don't insult or underestimate they intelligence and value
• Consider a substitution strategy
• Create substantial barriers to change (switching costs = fixed costs incurred by the buyer when changing supplier), ie.,
- re-training/learning curve impacts
- contract negotiations
- unproven support and service
- process re-engineering
- cost of failure/switching back
• Effective pricing is far more than pricing per se
• It involves all aspects of our businesses, target markets, product development and packaging, our level of customer relationships, innovation and confidence, understanding your value and that of the competition.
• SMBs have a substantial set of tools enabling us to respond to almost anything the economy throws at us.
• Use them, experiment, learn what combinations are best for you and your business...and share the knowledge.
Competitive Advantage - Creating and sustaining superior performance by Michael Porter
The Strategy and Tactics of Pricing - A guide to Growing More Profitably by Thomas Nagle and John Hogan