During times like this, companies are facing many new challenges, including a decrease in sales, no sales at all, and supply chain disruption. Depending on the industry and type of company, they may also face less demand due to restrictions on social gathering and travel bans in the short term.
Lack of cash and poor cash flow management are some of the biggest reasons businesses fail. Pricing considerations can be the cornerstone to ensuring a company survives a crisis, protects cash flow and remains in the black. Therefore, it is not surprising that in response to the Covid-19 pandemic, some companies are starting to adjust their pricing strategy.
Haidilao, a world-renowned catering enterprise, recently increased some of their product prices by about 6%. They claimed the main reason for the price change was due to the limitation of total tables served, reduced volume of customers, lack of employees, and the unstable and reduced daily revenue compared to before.
Dianping, the group-buying website for locally found food delivery services, consumer products and retail surveys, conducted a survey about the price changes and found that a large number of consumers expressed a negative reaction to this increase.
Since this price increasing strategy was not received positively and had a negative impact on Haidilao’s brand reputation, they apologized and changed the prices back to what they were originally.
So, how should brands activate their pricing strategies and associated campaigns during this global pandemic? Should Brands keep the same price, increase prices, or offer free discounts and trials?
In this post, we provide some tips and thoughts on how B2C businesses can survive during this challenging time.
As the situation gets better slowly, malls reopen and costs keep the same, clearing the stock and achieving missed sales targets are the top concerns for companies. In doing so, some of the important factors to consider are:
- Decreased consumer spending
- Changed consumer behavior
- Delivery speed of goods and services
- The importance of hygiene
- Social distancing, which doesn’t allow shops to achieve full capacity
As the impact of the coronavirus outbreak causes increased workplace regulations and travel restrictions, reduced customer spending disrupted supply chains, and uncertainty, Brands must manage the impact it has on their ability to meet strategic goals and customer demands. They are likely to increase or decrease prices based on consumer behavior and demand. And, this effort will vary by industry. For example, airlines will likely increase their pricing post-COVID-19 because travel restrictions and potential 14-day quarantine may make people skeptical of flying. With only essential brick-and-mortar retailers able to be open, more consumers than ever before have been shopping online, which uprooted traditional supply and demand and caused changes in selling strategies — including pricing.
When planning pricing strategies, be sure to take into account these considerations:
- Brand reputation – whether your brand is well known and has a strong awareness
- Your target audience’s reaction to the pricing change – if it will help or hurt sales
- Product worth and value proposition – consumers want to pay for the product’s value, not for the product’s cost
- Timing – during holidays, travel and food costs usually increase
- Packing, product and brand upgrade – packing can influence pricing (volume and weight) and product value
- Cross-promotion – reduce special attention of products as well as increase the product quantity and single price
- Frequency – one-time big increases vs. small increases over time
- Stock – inventory management and interrupted supply chains with limited purchases for in-demand products like cleaning supplies
- Cash flow – alternative solutions like technology and possible extensions with vendors, suppliers and landlords
- Focus on the conversion rate – optimize with reviews, live chats and purchase upsell features
- Return policies – optimize with money-back guarantees and ease of use
- Extra values – free services and consultation as well as enhanced customer service
- Sales strategy – update offerings and revamp marketing materials and CTA message
- Campaigns – look to AI and digitizing go-to-market activities
- Long-term impacts – plan for the future by preparing for unintended consequences while preparing to rebound
The COVID-19 pandemic poses major challenges in the short-term for Brands but also offers opportunities to transform sales that will help them come out of the crisis stronger.
Please share with us your pricing strategy during this outbreak. Follow us via social media at hashtag #tolmaogroup to discuss more.