Pricing is a Marketing Decision

There’s one important consideration that entrepreneurs must take into serious account before working out the pricing issues in turbulent times:

All factors being equal, customers want the best price and value period.

In other words, they are not interested in understanding why prices have to be adjusted to inflation (increased) or why a company is not dropping its prices like the competition.

When money is tight, consumers will buy the cheapest product or service as long as it delivers. 

That’s a fact of life that the entrepreneur must take into account while thinking strategically about the pricing issues in a recession.

And the point is?

Setting prices is a marketing decision.

Pricing must be done from a consumer’s perspective and not from a company’s. Entrepreneurs know why they must adjust the prices to the economic situation but their motivation is different to the customer’s.

That’s an important consideration to take into account. Some quick examples will illustrate the point.

If the entire competitors raise their prices as an inflation adjustment tactic, the consumers will buy from the business that never had to raise prices. That’s why for example discount outlets thrive in a recession. They’re able to sell the same products at lower prices while specialized retailers have no choice but to increase them to remain competitive.

On the other hand, if everyone drop prices and a given company cannot survive at such levels, the loss of business is guaranteed generally speaking. To survive such a company would have to give a valid justification to the prospects and hope that the concept sticks.

Pricing is a marketing decision above any other business function such as manufacturing. After all, it’s one of the factors that determine whether customers do business with a given company or not.

That’s an important consideration to keep in mind before playing the pricing card.