The right price
Companies urged to lower costs to stay in business
Business operators are being advised to pay close attention to their pricing strategies during the ongoing economic challenges.
Lecturer in accounting at the University of the West Indies (UWI), Cave Hill, Donley Carrington said it was critical for companies to employ various pricing strategies to keep customers and stay in business, especially during this recessionary period.
He was addressing a breakfast business forum and launch of a graduate placement website at Cave Hill Campus yesterday morning on the topic Strategic Pricing of Products and Services in a Recessionary Environment.
“Pricing during a recession or economic downturn is tricky. It requires considerable thought and it is fraught with dangers,” warned Carrington.
“The right price, however, can help a company to compete and even thrive during difficult economic times.”
He said psychological pricing, discounts and allowance pricing, segmented pricing and promotional pricing were some of the strategies an organization could use in adjusting its prices, but said careful consideration should be given to the type of customers that the company wanted to attract and the value of their products and services.
He noted that while it was not always necessary to lower prices, it was wise to add value or identify some “low value products to sort of give away” in some cases.
Carrington also advised that companies should “invest in innovation” to stay afloat, even after the economic downturn.
“So what we are saying is that even sometimes in [a recession] you have to look at investing in your research and development to ensure that you develop some unique products or services that you will go forward with,” said Carrington.
“Innovation will give you the edge when customers are seeking something that is new to lift up their own financial prospects during and even coming out of the recession,” he added.
He cautioned against getting into price wars.
“You don’t discount the price of your product or service for the sake of competing. If you get into a price war both companies may end up failing,” he warned.
The lecturer informed business owners to control their costs and reduce inefficiencies, adding that it was good for business both in and out of a recession.
“So reducing prices to generate more sales will not necessarily improve the business in the long run. So focus, to some extent, on how to drive costs down, how we could reduce some of the inefficiencies,” he said.
In addition, Carrington urged business operators to know when to say no to some deals, be opportunistic, not to panic, price with confidence and ‘gamble a little with price-driven customers’.