Marketing & Pricing on leaving lockdown
This article was first published in Business Times on 24 April 2020
Marketing & Pricing on leaving lockdown
by John Bittleston, Founder Mentor, Terrific Mentors International
The rejoicing on getting out of near lockdown – whenever we do that – may be short lived. Certainly, getting back to work will be a cause of cheer. The Terms & Conditions of doing so may be more contentious. You can ask a rational human to be kind but you can’t ask him to be daft. If other suppliers are better, faster, cheaper he will go to them. You are not living in a goldfish bowl but in a highly competitive world. If your customer is smart, he will have used his lockdown time to discover other sources of supply – or they will have sought him out. If your customer isn’t smart, look for smarter customers. Yours may be going to the wall.
Need for Agility
There is a certain irony in the way coronavirus has unfolded. Suggestions gave way to advisories which, in turn, morphed into orders. Those used to freedom of choice were generally slow to follow the first tentative ideas for self-protection. Those who live in societies where, routinely, ‘everything not compulsory is forbidden’ fell in line faster. Yet the very obedience displayed was, in some cases, a cause of further infection. Proof, if proof were needed, that you can’t win with absolute systems. Agility is the name of the game.
The same is likely to be for the revival of our economies. The rules advanced by the Big Names in strategy and planning may work or they may not. If applied dogmatically, they will risk being behind the events that are driving them. Look at the information for sure but also note the caveat word “available”. The best information on the current pandemic is yet to come. So how do you start your marketing and what part does pricing play in it?
Learn about your loyal customers
Your loyalist customers are the ones to cultivate first. Whatever the cause of their loyalty they are the people who provide the basis of your income. They are the people who will be predisposed to stay with you without costly enticements. Learn more about them. They are the customers you need and want for now – but are they the customers you want for the future? What makes them loyal? If it is a lack of initiative or personal resource, they will be a dying clientele and they will need to be replaced sooner rather than later.
New customers are always needed but you must get the right kind if they are to be durable. What has your research told you about the most likely buyers of your products? If the answer is ‘nothing’ you have either done little or no research or it has been about the wrong things. Better to do a simple bit of local research than none at all. The trick in making research valuable is not in the sample size but in the questions. Better to ask a hundred people the right questions than a million people the wrong ones. Get someone who does not have the company bias to frame the questions.
And, as is so often the case, time spent in reconnaissance is never wasted. Pilot focus groups are extremely valuable. I once had to conduct a highly complex study into cinema audiences in the UK. I had a pilot 150 depth interviews conducted even before we drafted the questions. It made what might have been a routine research report into a major social study. It even gave rise to questions in the British Parliament.
Price versus quality
Your customers always want cheaper products – until they fall below an acceptable standard. There are markets for basic, low cost items. Competing in these markets requires astute buying, tight inventory control and a hawkish vigilance about the way the market is moving. In these product groups the emphasis, obviously, is in favour of price rather than quality. Most markets are more balanced. Immediately after lockdown people will want the things they were restrained – or restrained themselves – from having. Knowing your customers’ standards and understanding what they are essentially paying for is important at any stage of business. Post-Covid 19 it will be more important than ever.
The oil market has just demonstrated one aspect of pricing. The United States glut of oil became so great that producers ran out of storage and were willing to pay customers to take the product away. A sizable share of the world’s oil tanker fleet was already sitting out on the ocean as not so cheap storage. Clearly, when the production demands make shutting down impractical, such extremes of pricing must kick in. Special considerations apart, manufacturers of consumer goods will be anxious to replace any lost volume. The temptation to reduce price to achieve this will be great. The activities of competitors will dictate your pricing decisions to a significant extent.
Learn from the past
We do not have identical situations to learn from, However, reduced sales on a much smaller scale are familiar events. All the evidence points to maintaining price as far as is practical. Sacrificing margins for volume usually turns out to be a fool’s game. Additional investment in promotion on the social and traditional media can, however, pay off, especially if your competitors are reducing their prices and thereby limiting their promotional budgets.
Measures to contain the virus are being extended. What we are learning about coronavirus suggests that early hopes of herd immunity may have been over optimistic. The first consequences of this pandemic are likely to extend to well beyond mid-year. Plan finances for the business at least six months ahead. Stay in touch with your consumers as much as possible. They are susceptible to reassuring communications from the suppliers at present. Service them by delivery where practical.
But above all remind them that you are still around.