How Good Pricing Strategy Can Help You Survive A Recession

During times of inflation, companies are likely to see a decrease in consumer spending and an increase in costs. So, now is a crucial time for businesses to take a long, hard look at their pricing strategy.

According to a Bloomberg survey of economists, the probability of a recession over the next 12 months is 47.5%. Of course, whether a recession is headed our way or not is still debatable among experts, but it doesn't ever hurt to be prepared. What is clear is that inflation rates are rising globally.

Rising prices initially framed as a temporary effect of the pandemic due to supply chain issues and high demand are not showing any sign of slowing down. During times of inflation, companies are likely to see a decrease in consumer spending and an increase in costs.

So, now is a crucial time for businesses to take a long, hard look at their pricing strategy. A few key moves can ensure that you stay afloat during a recession and keep your profit margins and revenues intact, maybe even grow if you play your cards right. In other words, it is possible to thrive, not just survive!

Here are some broad factors to consider when deciding your pricing strategy for the season ahead.

Competitor Pricing

Companies with the best pricing power will survive in a highly competitive market while increasing their margins and revenues. Pricing power refers to the ability to raise prices without decreasing demand. Think of luxury brands, scarce goods like hotels and flights, or companies that have built brand loyalty. On the other hand, companies in the commodities sector may aggressively try to position themselves as the most affordable option in their industry, but pricing too low can provoke doubts about quality. At the very least, you can use competitor data to keep your prices from exceeding the average for your industry.

Price Elasticity

Instinct may tell you to lower prices and offer discounts to retain and acquire new clients, which is helpful if your product is highly elastic in its price. i.e. a price change significantly changes the amount of demand. However, it's worth accounting for other factors. For example, in the case of travel, people have been able to save up for trips that have been denied them for so long. As a result, they may be willing to shell out for the higher airfare once they get the chance. Therefore, a good understanding of your product's price elasticity is essential before you make any decisions.

Alternatives and Substitutes

If you are easily replaceable or in a highly competitive market, you will likely lose customers to (seemingly) better-priced alternatives. During a recession, it's all the more important to differentiate yourself in the market as unique and hard to replace. Innovative, valuable, and efficient solutions will survive best. So, talk to your customers regularly! Ask what would make them excited about your product. Find out what aspects of your service they don't enjoy. Then, strive to provide stellar customer service and products. Make it difficult for your customers to find a substitute. Keys to Pricing Strategies in A Recession Here are the most common pricing strategies that companies employ

1. Cost-based Pricing

This is one of the most common ways that companies deal with inflation. The price is usually a sum of the cost and an additional profit margin. As suppliers' costs increase, most companies increase their prices accordingly to keep profit margins intact. This is what we call cost-based pricing strategy. Evidently, this strategy may not be popular with your customers. So let's look at some other methods.

2. Key Value Product Pricing

If you look at your pricing model product by product, you'd be tempted to go with the cost-based pricing discussed above. Instead, look at your product portfolio and identify your most popular products. Prices for your most popular or 'key value' products can stay the same even if their cost increases. You can try to keep your overall profits intact by raising prices on other high ticket or 'premium' offers.

3. Narrow Product Focus

Make things simpler for your team and your production line. Try to reduce the number of similar models/packages, especially if they have trivial or superficial differences in their features or sizes. When your offers are more straightforward, you'll save unnecessary costs in marketing and delivery. You may have noticed, for example, that most SaaS companies tend to have just three offerings at three different price points even though their products may have numerous features.

4. Dynamic Pricing

A dynamic pricing model automatically adjusts prices to changes in various factors, including the ones we just covered, like competitor pricing, supply costs, elasticity, and product portfolios. Look at hotel rates. Prices change significantly according to season and certain times such as holidays, special days, or events! And that's just one factor. The best pricing strategy is one that considers all the factors we just discussed if you want to optimise your profit margins.


If this sounds like a bit too much to keep track of all at once, the good news is that you can automate all of this with software and AI to make data-driven decisions. At SYMSON, we help companies manage prices and optimise their margin through intelligent pricing software. We do this by automating tasks and combining multiple pricing models.

Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!


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