Pricing in a Pandemic
This is Not a Blog on Price-Gouging
This is a guide to pricing in a pandemic. There are two sides to this story. Many of our clients remain in crisis-management due to the COVID-19 pandemic, experiencing a cash crunch in these uncertain times. The majority of businesses likely fall into this bucket. Then, there are the businesses that are in the unique position of seeing an increase in revenue due to the COVID-19 crisis. So, what is the best approach to pricing in a pandemic?
Begin With the Human Side of Things
Consider offering discounts to those hit hardest or those most affected by COVID-19 (for example, offering discounts to essential workers). Or, donate a percentage of proceeds to a cause that is meaningful to you. Not only are you helping out those in need, it also offers an opportunity to have a conversation around your product or services which is a nice marketing pitch. You do not want to simply create a halo effect, but the actions you take in this defining moment can build goodwill within your network moving forward.
Offer a Trial or Sample
It is harder now to acquire paying customers. Offer a teaser of your product or discounted-use for a set amount of time. A four-week trial or a few samples asking them to subscribe could go a long way in building a bigger customer base and driving interest. Use these offers to build your database with the hopes of converting them to paying customers later on during the recovery phase.
Some of our clients that have a tiered SaaS model are seeing users downgrade to lower tiers. This may seem dire in the moment, but retaining them as an active user (even if it is at a free level) is still better than losing them completely and having to get them back later. Do not aim to optimize for maximum revenue right now. Instead, plan to build your customer base for a future upturn.
If you are one of the lucky few businesses that is doing well during the pandemic, you may consider lowering some prices or fees to yield higher volume. Even at a discount, this can sometimes generate higher revenue. The altruistic approach in turn helps your brand.
Consider Flexibility Over Lifetime Sign-Ups
Rethink the long-play sales approach. Now is not the time to go after lifelong subscribers. Too many people are facing such great uncertainty that you are better off being flexible with your pricing than rigid. A few examples:
- If you are a consumer products company, you could offer a percentage off for anyone who purchases a larger volume of inventory.
- SaaS companies have a tremendous opportunity with many people working from home. Try teasing out your services to offer more basic packages with more add-ons, so customers can customize your product as much as possible. Having more pricing tiers is better than more customer churn right now.
That said, do go ahead and give people special discounts right now. Offer discounts to those people who are interested in either paying for a subscription or service upfront for a longer period of time. If you make it very clear that it is a one-time thing or due to the current climate, you can offer these without harming your value proposition long-term.
Remember to Address Your Current Customer-Base
Do not just send an email. Strengthen your current customer-base and commitment to your product by showing your appreciation. Are there rewards or points you can offer for continuing loyalty? A special sale only for existing customers?
If you have a smaller customer base or you have a lower-volume professional service model like us, for example, exercise the surprise and delight concept. There is a significant benefit in taking the time to connect with each client. Enhancing your product or “gifting” your time is both reassuring and beneficial to retaining your customers through financial hardships. After reaching out to each of our clients and assisting many with their Paycheck Protection Program (PPP) applications, I received a great deal of positive feedback and gratitude for taking the extra time to connect and help especially those clients that now know they can keep employees on the payroll longer.
And by all means, do not forget your value proposition.
We have always touted the benefits of value over barrel-pricing. While we do think cash is more important than profit margins right now, one thing holds steady even in a pandemic: The value of your product should remain at the forefront of your pricing strategies.
For more information, contact Chris Arndt at firstname.lastname@example.org or at 312.494.7014. Visit ORBA.com to learn more about our Cloud CFO Services.
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