Sales and pricing dynamics in your business may need to take detours in 2021, whether it is offering strategic discounts, considering new products and services or developing new online experiences.
"Companies need to be nimble to attract consumers to their businesses, especially while the pandemic is still affecting them," said David Cameron, head of business banking at City National Bank. "Consumers expect both value and appealing shopping experiences, so businesses should explore ways to go above and beyond if they hope to charge full price."
But while price-conscious consumers do seek good deals online and in stores, retailers and suppliers can do more than simply offer discounts to generate business.
Below are five ways companies can shift their focus away from pricing in order to promote growth.
Business consultant Scott Edinger suggested in the Harvard Business Review that companies update their sales strategies to adapt to the pandemic. He said that while the economy and many businesses suffered in 2020, the outbreak also has produced lifestyle changes that create new opportunities in 2021 and beyond.
The restaurant industry, for instance, continues to find "new methods of evolving and attracting consumers without slashing menu prices, including deliveries, new products, creating parklets and open areas for seating and more reservation structuring," Cameron explained. "The experience of eating at a restaurant is necessarily different because consumers today are hyperaware of different issues. Their desires are different."
Because consumer demands are changing in the pandemic landscape across verticals, businesses may want to try out new products or services that dig into what exactly is fueling - or reducing - their own sales at this time, including a store's physical space and how customers are served in it, Cameron said.
Even relatively simple experiences that deliver value to customers - such as creating videos, online forums or virtual executive meetings that offer insights on dealing with the pandemic - can make a huge impact on sales, City National's Cameron noted.
"Businesses have had to reinvent themselves, or look for new ways to drive revenue, and many are finding success in thinking outside of the box and connecting with their customers on a more understanding-based level," he said.
A look at headlines shows the types of shifts companies are making. Dick's Sporting Goods, for instance, appeared to combine holiday sales with pandemic-inspired services when it announced it would hold "10 Days of Black Friday" to help keep shoppers safe and hire extra employees to handle curbside pickup.
Because many people still aren't comfortable shopping in a physical space, there's a good chance that most of your potential customers are visiting your online store, looking for an efficient way to shop and feel seen and heard by the experience you curate there, Cameron said.
“There's still a drive for value, and people are also looking for connection. This can mean the experience of the actual shopping that you do before you purchase, or the experience related to the purchase itself," he said.
A "value upsell" could be one inviting experience, he said. “Instead of just cutting prices on everything by 25 percent, maybe it's having a customer buy something and then receive a discount - along with a nice note - on their next purchase."
A "unique to you" offer can be a huge part of the customer experience, especially during challenging times, Cameron said.
Reworking pricing can make a difference — and each business will need to approach this based on its industry and particular circumstances.
Vinay Saboo, president of West Coast Imports in Commerce, Ca., has made several adjustments to his business's pricing strategy since the coronavirus pandemic hit the United States.
Among other moves, the wholesale company, which sells lighting, pet products and housewares to retailers, offered short-term concessions — 30-day promotional pricing — before restoring regular prices.
"This allowed us to preserve long-term product value and allowed our customers short term flexibility," Saboo said.
Markdowns have been more difficult in Saboo's business during the pandemic because trucking costs have soared, he said. The company's agile approach includes flexibility on minimum order quantity — allowing customers to buy a larger variety of products to meet their purchasing budgets for a specific month or quarter.
"A variety of products allowed consumers at point of sale to see more options than they would have normally seen," Saboo noted.
West Coast Imports also continues to rely on its seasonal "value-pack" strategy to sustain revenue and enhance its retail customers' sales. This approach involves working with retailers to repackage inexpensive products into an appealing set, which can drive more traffic into stores and bigger sales.
If a battery-operated flashlight sells for $4.99 at retail, Saboo might sell it in a value pack with complementary products, such as another type of flashlight, a headlamp or a small tool set. These promotions typically require months of advance planning, though, and often are rolled out to correspond to holidays like Christmas or Father's Day.
While value packs can be winners, it's important not to overdo the strategy, Saboo warned, since they may undercut a best-selling individual item.
Companies realize they do need to offer some deals for consumers who are tightening their belts during the outbreak, Cameron said. Beyond attracting customers, he said, discounts provide a way for retailers to reduce inventory levels before new products arrive.
In fact, retailers stuck with excess inventory because of the pandemic may need to offer deals to help liquidate those goods, said Fred Hurvitz, Kohl's Professor of Practice for Retail Studies at Penn State's Smeal College of Business.
In general, Hurvitz said, each type of retail business may pursue a different pricing strategy.
"The pandemic has had an effect on everything, including pricing practices. It really depends on the products being marketed as well as the cost associated with offering these products," he said.
Pricing for essential items remains highly sensitive to supply and demand, and the retailer's costs and desired margin are likely the most important considerations in setting consumer prices for those products, Hurvitz said.
"Obviously retailers also must be sensitive to competition, but since consumers need these types of products, pricing practices don't have to be dramatically altered," he said.
"Products that are more discretionary, such as clothing and jewelry, have to be treated differently. Because a greater number of potential buyers are more concerned about the economic uncertainty caused by the pandemic, they are less willing to buy impulsively. Value becomes really important when considering purchases."
Retailers generally need to avoid overly inflated prices, Hurvitz said. "That is why retailers such as Target and Walmart have been doing just fine during the pandemic. Their everyday-low-pricing approach has resonated with economically concerned consumers."
Home improvement and sporting goods stores also have fared well during the pandemic, he noted.
Loss leaders — products sold at deep discount close to the retailer's cost — represent one method to attract customers, Hurvitz said.
“Deep discounts are great deals for the customer, but the purpose is to draw the customer to their place of business or onto their website with the hope they'll like what they see and return," he added.
Farla Efros, president at HRC Retail Advisory North America, expects to see more dynamic pricing — where prices change in line with demand — in 2021, primarily in online shopping.
After being left with excess inventory early in the pandemic, retailers are now making smaller orders and trying to push items at full price based on a scarcity approach, she said.
This results in a strategy based on scarcity, with the message being, “If you don't buy it now, it may not be available," she explained.
Traditional pricing and marketing strategies are "all out the window during this pandemic," she said. "It is truly a week-by-week decision, and companies have to be nimble in order to pivot appropriately in such a completely different territory."
You are invited to keep up-to-date with the latest economic perspectives and shifting global markets during the pandemic by signing up for City National Bank's newsletters here. Delivered biweekly, straight to your inbox.
This article is for general information and education only. It is provided as a courtesy to the clients and friends of City National Bank (City National). City National does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors or persons quoted as of the date of the article with no obligation to update or notify of inaccuracy or change. This article may not be reproduced, distributed or further published by any person without the written consent of City National. Please cite source when quoting.