SMB Strategy to Survive Disruption: Low Pricing.

7 Min Read
The following are some strategies for small businesses to succeed during supply chain disruption. Pricing...how low are you willing to go?

The following are some strategies for small businesses to succeed during supply chain disruption. Pricing…how low are you willing to go?

Supply chain disruption and low pricing are not new phenomena. You don’t have to dig hard to find statistics on it daily. Unluckily, there is no one straightforward answer to the present problems resulting from a perfect storm of various variables. Overseas manufacturers are still reeling from the epidemic’s effects.

Ports are bursting at the seams, and there aren’t enough trucks to transport the requisite amounts of cargo. This involves some deep technology for small businesses.

This interruption has had a significantly negative impact on small enterprises, which cannot typically store products well before the disruption. And we are well aware that this has directly correlated with a dramatic spike in inflation. With many other disturbances we have seen throughout time, this one also offers an opportunity.

There are several ways to prepare the groundwork for taking advantage of these changes as they present themselves. Things like reexamining price seem to be straightforward solutions, yet there are other levels of intricacy involved. Here are five essential questions to think about.

1. What is the nature of your competitive environment?

The first and most important question is…do you clearly understand your competitive landscape?

What strategies are your rivals employing? Is it true that they’re boosting prices? Is it difficult for them to even meet the needs of their most important customers?

Do they have extensive inventories or large capital reserves that they can use to leverage their position?

Of course, most of this will not be made public, but the word on the street may be pretty effective. Contact people in the business to see if you can get a complete view. This will serve as the lens through which you will view all subsequent decision points.

2. Is raising pricing even a possibility at this point?

In light of the nature of the products and services you supply, do you believe there is a chance to boost your prices?

Price hikes might take months to take effect, depending on your company’s sales cycle. This is particularly true for organizations that have long-term contracts.

Pricing is either limited or mandated to some sectors and organizations that provide services to government consumers, such as those in the healthcare industry. Each company is different in this respect, and there are numerous shades of gray around it, but there are some fundamental issues that we can address.

How much of your cost increases do you think you can avoid? In this case, let’s consider the effect of price rises.

The cost of inputs increases for businesses across the board, affecting everything from labor to raw materials and supplies. The same factors that affect offsets apply when it comes to sales cycles. If the cost of inputs increases, there may be a lag before your pricing adjustments become effective.

Price increases may also need to be phased in over time to minimize your clients’ impact. Understanding the potential net impact of price adjustments can assist you in making decisions about the quantity and timing of price increases in the future.

3. Is it appropriate to increase prices at this time?

A firm may decide that increasing prices is not the best course of action despite the challenges and possible effects on profitability.

Using your knowledge of the market environment, do you think this presents a chance to acquire a market share or strengthen consumer loyalty?

Several companies effectively used this technique during the early stages of the epidemic, allowing them to reinforce their position with their consumer base while simultaneously luring customers away from bigger, slower-moving rivals.

The ability to provide excellent customer service may be a much more effective instrument for increasing the long-term worth of a firm than changing price.

4. How much more are you willing to hike prices?

After going through all of the filters up to this point, the next step is to look at the increases’ structure.

Are the price hikes consistent across the board, or are they product-specific? If there is a staggered approach, are the increases in equal increments, or is there a spike followed by a series of more gradual rises? Is it preferable to raise prices faster than the rate of increase in your expenses to stay ahead of rising costs…or is it better to lag?

5. Examine the surrounding environment.

Do the necessary calculations, and determine the prospective consequences. Pricing may be a valuable tool in the middle of supply chain upheaval, but if utilized incorrectly, it can do long-term harm to your company.

Understand the levers you may use and the locations of the ceilings so that you can thoroughly analyze your alternatives. Although pricing may seem to be the obvious solution, is it the best solution? A thorough examination and a deliberate forward-looking approach may make all the difference.

Keep calm and discount mindfully.

Be prepared for however long it takes. Stay focused and hoard energy for the big push.

Know when to pick your battles. Engaging in a price war might do more harm to your business than good. Play the long game, and keep communication lines open with your customers.

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