Discount Pricing in Recession: Magic Wand or Herd Mentality?

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in The Wrong Question


You've been around long enough to realize there are no magic wands.  Slashing prices is more of a desperate act than a magic wand, but you'd never guess that from the business media or this article from last week's Wall Street Journal.

The logic flow is something like; "Wow, we are in a recession, my sales are down because people are more prices sensitive, I should lower my prices".  Classic herd mentality fanned and encouraged by the business media.  The herd is heading for a cliff which could cause injury or death.  Let's be a bit more creative...

Better Question: How do I show more value with current prices?

In the WSJ article a limo company owner says, "Once the economy does improve I hope customers will upgrade to a more-expensive plan."  Really, hope is the best he can do?

Do you know why may they upgrade...?  Because, it is better riding to the airport in a black car than a crappy van with a bunch of strangers.  We all know this, maybe now is the time for a reminder, not an incentive for the van.

Remind employers about the message they give their sales people who have to put up with all the other drudgery of travel that you really care about them.  It will cost you about $20-$25 more, but it is worth a more productive and happier employee.

Remind the executive or business owner they are worth a bit extra, how they can be relaxed and happy when they get back to their family.  Remind them of the drudgery of bad weather and crowded parking lots.  In short, remind them of the value you bring and why it is worth a bit more.

Starbucks does a great job with their "Its Starbucks" campaign.  Did you know their coffee is "sourced from the top 3% of coffee beans in the world", that they batch roast twice to enhance flavor to maximize the "roast curve", and their tasters sample over 250,000 cups of coffee a year?  Neither did I but I feel better about my $4.19 venti skip chai, extra hot with no water.  It is actually a pretty good deal.

Starbucks' sales are off during this recession, but they are taking a much different approach that will not cheapen the long term value of their product.  They realize consumers will not magically return to higher prices in the future and they also realize consumers will respond to value once explained.


Think about the graph and the comments by John Tripp.  Reflect on what it represents for your business.  You will always have consumers who think your prices are too high.  Forget them, set your prices based on the value you create for others and focus on educating them on why you are a great bargain now, more than ever, at your current price.

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