Pricing during a pandemic

We are livingthrough unusual times. The world is coming togrips with a ‘new normal’ created by COVID-19. Governments and businessesalike, across the world are trying hard to overcome this great humanitariancrisis.

Globally, economies are staring at a recession, driven by rapid demand declines across all industry verticals. The UN expects global GDP to shrink by 1% in 2020. Businesses are struggling to navigate rather unusual circumstances during this global pandemic event.

Pricinghas always been a culmination of a company’s strategic and operationaldecisions. Therefore, in these turbulent times – pricing is one of the mostimportant levers available to ensure nimbleness to navigate the uncertainty andensure preparedness for a potential ‘new-normal’ ahead.

What can Pricing Leaders do now?

In anextremely uncertain situation like now, people gravitate towards familiarity, makeless expensive purchases, postpone important decisions, cut-down onnon-essential spending generally resulting in revenue and market sizecontraction and margin loss.

A three-step framework will help achieve a hard-look at the current process and re-shape it to navigate the future ahead.

Review

Strategy is driven by long term goals, past business performance and future forecasts. Typically, forecasts are based on ‘business as usual’ considerations. But in an once in a century event, like COVID-19, forecasts go awry.

It islikely that assumptions made while creating customer-willingness-to-pay models might no longer hold good in thecurrent scenario. Such models, wherever used should be reviewed and redesignedbased on new strategic considerations.

Businesses are staring at a ‘newnormal’. It is imperative for organizations to review their pricing strategy toensure it stays relevant and in sync with overall business strategy.

Redefine

Theprice you set is a proxy for your brand. To ensure the right messaging in termsof how you want your customers and/or consumers to think about your business,product or service, pricing teams need to ensure that defined pricing guardrails are still relevant in the current business environment.Demand and supplyvolatility, large earnings drop and the uncertain global business environment, callfor pricing teams to redefine even the most fundamental pricing parameters toensure pricing is relevant. This calls for pricing teams to closely examine andredefine it’s existing pricing rules. It is likely that some of your previous rulesare no longer relevant. In addition, price bands that define approval levelsmight need to be changed or tweaked to reduce the number of pricing exceptions.Standard Discount Structures, which define standard deal discounts based oncustomer and deal attributes should also be reviewed and redefined

Re-imagine

Reviewingand perhaps renewing your pricing strategy, rules, models is not good enough.Good pricing strategies must be followed up with flawless execution. With mostpricing teams working remotely, this is a good time assess how robust yourpricing processes are. Is your pricing people dependent, process dependent ordata dependent?  Pricing leaders must usethis opportunity to identify chinks in their pricing armour and  iron out issues related to pricing process.This will allow you to make pricing process more resilient, pricing teams moreagile and approach to pricing future proof.

Onceidentified, the measures mentioned above need to be quickly and rigorouslyassessed by their impact on EBIT and the company’s ability to execute swiftly. Thisrequires ability to access the impact of these changes in different scenarios. Imaginea world where you could implement pricing strategy, rules and price bandchanges and communicate that to your field sales reps in hours, rather thandays. Also imagine if you hadvisibility on the impact of your pricechanges and ability to be nimble and agile enough to fine tune your pricingstrategy based on how prices are performing in the market. A good pricingsoftware will help companies do exactly this.A pricing softwaretool acts not just as a central repository for all your pricing decisions orautomates pricing decisions, it also allows pricing organizations to be morenimble and responsive. It optimizes prices, ensures consistency of pricingdecisions and provides visibility to impact pricing decisions.

The time to act is now...

COVID-19continues to have a far-reaching effect on people’s lives, families, andcommunities as well as on the global economy. In these times, businesses whichrespond swiftly to this crisis will establish a foundation for future growth.

Interesting times ahead in pricingfor sure!