Ditch the discounts

Ditch the

Discounts

How smart companies use adaptive pricing to ride out the recession and reprice for recovery.

The Great Pizza War

$5.99 for two topping pizzas

$10 for a large pizza with unlimited toppings

During recession

Companies competed with one another by chalking out heavy discounts to improve sales and attract recession

weary consumers.

Yet why discount is an unfortunate move by a company?

• Across-the-board price cuts reduces profits

•Deep discounts devalue a product or service

• It limits the company’s abilities to raise prices as economy improves

• The hassle to introduce higher quality, higher priced versions of regular products to attract customers after offering heavy discounts

Petrol in India

Price Drop Price Hike

Adaptive pricing

Different customers have different needs and place different values on a product or service.

Key to adaptive pricing

• Price like colour or style is one of a product’s attributes.• Adjust the attributes to appeal to customers without dropping

the price.• Sell through different channels.

Attribute is flavour.

Versioning

• Offering “good", "better” and “best” varieties of the same products.• Worked best for companies with weak demand.• Powerful magnet for price-sensitive customers.

Aimed at health conscious customers who want low fat ,sugar free and probiotic ice-cream.

Aimed at price conscious consumers with basic flavours.

Amul’s expensive and superior quality ice-cream.

Nano launched by Tata aims at price sensitive customers who wanted an affordable car by reducing manufacturing costs.It is the most basic car launched by the company.

How to price in a recession

Introduce lower-priced versions

Aimed at budget shoppers who wanted quality but didn’t want to pay for premium prices.

Use promotions to avoid price drops

Adapt products to maintain affordability

Unbundle services and add extra fees

Fees charged for reservation, meals and luggage.Attract price sensitive consumers with low pricesEarn high profits from premium travellers.

How to price in a recovery?

Withdraw recession-pricing tactics

Introduce new premium products

Increase the price of regular products

Increase the price of regular products

Creative financing

Best method to holdline on prices.

Pricing is not just about “increasing” or “decreasing”

Learning to implement adaptive pricing will lead to new customers and improved sales.