Pricing Strategies To Focus On During The Coronavirus Pandemic
by Joni Newkirk, CEO, Integrated Insight
In times of crisis, there is risk of making short term decisions that will have long term impacts. Severe price increases or price gouging will take on a life of their own. The negative word-of-mouth companies will receive from price gouging will have longer negative consequences than any economic impact. Conversely, deep discounts and potential price wars are not sustainable. Here are four pricing strategies to focus on during the coronavirus pandemic:
Create strong value for consumers.
Target a specific customer base.
Be “fenced” to avoid dilution.
Have strong marketing messages that resonate with the consumer.
Let's take a look at what these mean and tactical examples to apply them.
1. Create Strong Value for your Customers
Create strong value for your customers by considering their wants and needs. Package your products and services accordingly. The Coronavirus is likely to change consumer behavior in some ways. They will be more cautious of their physical space and social distancing. They are likely to be more attentive to health care. And perhaps they will become more conservative in their spending as jobs are at risk. But they will also be looking for opportunities to escape the confines of their homes. Consider promotions that avoid discounting your core product. Instead, add value by increasing the amount of product or service the consumer receives for that price. Here are some examples.
- Bubba’s Sports Bar is open for take-out only for the next several weeks. But they also want to make sure customers will feel comfortable coming back this summer. Bubba decides to extend an offer to anyone ordering take-out during “stay at home” days. Once the restaurant re-opens, they can get one half-price, table service meal inside. The intent is to keep customers coming in for take-out now. But also give them an incentive to dine out later.
- Vacation Away Travel Agency has seen its business decline due to travel restrictions. In addition, people are asked to stay at home. But even some who haven’t used a travel agency previously will see value in doing so. Just the fear of being stranded is enough incentive. Vacation Away decides to package products and services into a promotional offer. It includes free travel insurance, concierge service for emergencies, and a travel medical supply kit.
2. Target a Specific Customer Base
Business owners can stimulate just enough demand by targeting a specific customer base. They avoid the risk of giving up unnecessary profit. Targeting offers to specific audiences also allows for customization. You can potentially reward your most valued customers.
- Bubba decides to target his bounce back offer to neighborhoods farther away from the Sports Bar. Intentionally, these are not necessarily the customers using take-out today. This should lead to incremental take-out sales as well as a future visit.
- Vacation Away wants to limit exposure should they actually have to evacuate someone. They decide to offer the package only to clients booking trips to Europe and Scandinavia.
3. Fence Promotions to Avoid Dilution
Fences make good neighbors. They make for good offers too. Fencing applies to rules and procedures that keep the offer valid only for the intended audience. Determine how to fence the offer in advance. Fences can be hard, whereby the consumer needs to prove they are eligible. Or they can be soft, where only the intended audience is likely to respond.
- Bubba doesn’t need to stimulate table service dining during weekends. Plenty of televised sports bring in customers. He also believes it will only take a couple of months for people to feel comfortable dining out. He decides to put a time limit on the offer, good for Monday through Friday only. He also limits it to just June and July.
- Vacation Away feels good about its offer, but worries about the cost of large parties. They decide to limit the offer to travel parties of eight or less to avoid large, multi-generational groups.
4. Create Strong Marketing Messages to Resonate with the Consumer.
Marketing will ensure promotions drive incremental demand and revenue. They must reach the consumer in advance of their decision making. Savings or value messages need to be clear and concise, and consumers shouldn’t have to do the math. “Save 5%” is seldom motivating even if that is all you need to do. “Save 30%” is more compelling than “Save 29%”. “$10 off” is meaningless unless the consumer knows the original price of an item. “Buy two of X and get Y free” only works if Y is something they value.
- Bubba’s half-price table service meal is a strong offer. Consumers can easily see the value. The restriction of Monday through Friday is a bit limiting, but worth it to avoid dilution.
- Vacation Away should consider showing the actual savings the offer provides. They could also market the intangible benefit of peace of mind.
Regardless of what industry you are in, remember to always lead with the consumer. Once you understand what is in their hearts and minds, great pricing strategies will follow.