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Recession Preparation: Don’t Panic on Pricing Strategy | Modern Distribution Management

Al Bates is on a quest. The principal at Distribution Performance Project wants to see if distributors can avoid the same mistakes made over and over again, each time the U.S. economy enters a downturn. “Generally, we tend to respond to a recession by cutting price,” he says. “That does nothing more than make a bad situation even worse.”

Bates’ reasoning is everybody else is cutting price. If it’s already a down market, cutting prices is not likely to generate more volume. Although it’s human nature to do it, Bates hopes his April presentation at MDM’s Pricing & Profitability Summit, Avoid Mistakes of the Past to Stay Profitable in a Sales Downturn, gives distributors reasons not to succumb to the instinct.

Distributors who observe competitors around them lowering prices are likely to feel pressured to do the same, but Bates argues there is less price sensitivity in the market than most believe. Don’t “lead the parade on lowering the price,” he says.

Following price cuts, distributors are next most likely to cut expenses when bracing for an economic downturn. Another mistake, Bates says, if those cuts are also across the board. “I’m always in favor of having expenses controlled properly, but we usually cut across the board,” he says. “We end up slashing a lot of expenses, and when the recession ends, we have to add back what we’ve already cut.”

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Recession Preparation: Don’t Panic on Pricing Strategy | 2019-03-18 | Modern Distribution Management.

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