2021 is just around the corner. Here are the three critical things to do to plan you pricing strategy for next year., and a tool to help you with your planning.

In The Strategy and Tactics of Pricing Sixth Edition, Tom Nagle and Georg Muller say “One of the major differences between tactical and strategic pricing is that tactical pricing assumes that price sensitivity is a constant.” Covid 19 has proven this assumption dramatically wrong. We all need to think strategically about pricing. Connecting pricing to scenario planning is critical to this. This is how you will find the leverage needed to shape willingness to pay.

In a time of uncertainty one of the most powerful tools we have is scenario planning. This approach has been underutilized in pricing, but its power is now becoming apparent. There are three key ways to use pricing scenarios. Each of these is explored here.

Value drivers are generally stable over time. Once you understand them and have used them to segment your market you have a solid foundation for your pricing strategy. But when there is a severe supply or demand shock, and we currently have both, that can change. There are some standard patterns for how value drivers change. Understanding these is critical to planning your response to the COVID 19 crisis.

Different scenarios offer insight into optimizing pricing for various conditions, including commodity markets, loyalty-driven demand shifts, & extreme demand scenarios. Segment customers based on market dynamics to adapt pricing strategies effectively.

Scenario planning is a powerful tool for managing uncertainty. It is a powerful way to frame pricing strategy and to prepare a portfolio of pricing actions. Planning is important to pricing agility.