With the holiday season upon us, many retailers are wondering what pricing strategies they should implement to price for profit and growth.

 

This year, more than ever, the U.S. is a “have” and “have not” economy. On the negative side, consumer sentiment remains low and the unemployment rate continues to sit at 9.6%. However, there is positive news: Personal expenditures were up by 2.6% in the third quarter, the Dow Jones Index is over 11000, corporate profits are on the upswing and unemployment has stabilized (albeit at an unacceptably high level).

 

Bottom Line: A new opportunity exists this holiday season to serve cautiously confident consumers who, due to pent up demand and an interest in treating themselves, are willing to open their wallets.

 

Trend 1: Tailor your pricing strategy to your customer:

 

•In economically-depressed areas, continue the status quo pricing strategy of recent holiday seasons: focus on staple products, offer financing and layaway plans.

•In cautiously-confident markets, there is an opportunity to sell higher margin luxury products and services.

 

Trend 2: Show customers why they should purchase your product:

•In previous holiday seasons, price was the key driver of sales. This holiday season, cautiously-confident customers are willing to pay a premium for unique features (for instance, ads for Apple’s MacBook Air highlight its thinness).

 

Trend 3: Feature upscale “reach” products to cautiously-confident consumers:

•While the basic version of an upscale product may be discounted to attract consumers, reap higher profits by offering upgrades as well as complementary products.

 

Trend 4: Welcome cautiously-confident consumers back with new pricing plans:

•Offer generous financing and layaway plans.

•Minimize risk with “satisfaction guaranteed” pledges.

•Offer lower cost options such as “basic” versions, rentals, and leases. 

 

Trend 5: Offer experiences to cautiously-confident consumers.

•After years of pinching pennies, consumers are willing to splurge on fun experiences.

 

 

 

 

Rafi Mohammed, Ph.D. is the author of the  pricing strategy book, The 1% Windfall: How Successful Companies Use Price to Profit and Grow (HarperBusiness).