Tools & Technologies

How to Manage Your Business in a Recession: "#5 Don’t Rush to Cut Prices"

The January 19, 2009 edition of Fortune magazine features an article entitled “How to Manage Your Business in a Recession”, authored by Geoff Colvin (pp.66-71). Inside, Geoff lays out 10 ways to weather the current economic storm. He starts:

“Exciting as it is to be living through historic economic drama, you can’t just stand by and watch. You have to act–yet you have no script. So much of today’s turmoil is unprecedented that we can’t find much guidance by looking to the past. For managers across the global economy, as well as for Team Obama on its way to Washington, today’s great question is, What do we do now?”

Let’s take Geoff’s 10 principles, and analyze the implications for your collaboration strategy (see the links to all 10 principles). Let’s focus on #5, “Don’t Rush to Cut Prices”.

5. Don’t Rush to Cut Prices
During hard times, everyone wants to pay less. Resources are tight, so you want more bang for your buck. But for any organization, there are dangers in cutting prices. Now having a collaboration platform at your place isn’t going to suddenly mean that all of your customers no longer want a smaller price — but it can contribute two somethings: collective intelligence and community.

Collective Intelligence
Geoff’s recommendation is “to study price sensitivity in your markets much more closely than before”. For this activity, a collaboration platform that brings the people in your firm together around this objective, and gets them trading war stories and examples, provides an excellent source of analytical fodder. The platform would allow people to contribute what they are facing with specific clients, the approaches they are trying, and the results they are getting. It would also provide an opportunity for other people in the firm to offer ideas on alternative strategies, eg, “I faced a similar situation last month, and we won the business by doing … “, or “Have a talk to Joe in Atlanta, because he is trying to do the same thing as you.”

A collaboration platform offers major benefits:

  • Staff can participate from wherever they are located. They don’t have to congregate in a physical place for a meeting, because the platform offers an alternative place.
  • A collection of stories, examples, advice and outcomes are built up over time, providing a rich source of data intelligence for pricing analysis.
  • It demonstrates the connectedness between people, and offers pathways for communication and interaction between people who would otherwise have never met in person, nor known of common interests.

Community
One of the tenets of good customer service and retention is to find ways of increasing the value that a customer gains from being your customer. There are many ways of doing this, and one of those ways is to make them part of a community of like-minded people. For this, a collaboration platform can assist you in creating a customer community around the effective use of your products.

Customer communities provide ongoing social proof that you are “good” provider of products or services. Hey, if people from other firms are raving about how the use of your products are assisting them in being successful, it’s a very strong endorsement for others that hasn’t come from your lips. It’s always best if other people praise you, rather than you praising yourself.

There is another benefit. Customers thinking about going elsewhere for their product and service needs will have to give up their involvement in your community, and thus whatever price concessions the other firm is willing to grant could be far outweighed by the loss in value due to relinquishing their right to community involvement.

What Else?

What strategies of success are you embracing as the economic indicators spread fear and alarm?

Categories: Tools & Technologies