Price And The Recovery: A Tale Of 5 Kingdoms, Pt 4

The first recovery, the hoped for "V shaped", has
been the typical pattern of post WWII recessions. It is characterized by
rapid growth following stabilization, typically in excess of 4%. The following
is the pattern of growth for modern recessions:
As the economic contraction leaves the economy below its
full-capacity potential ,industrial production, labor rate utilization, and
plant
capacity increase to replenish low inventory levels. Consumer sentiment and
demand generally reach pre-recession levels within a year. Such a supportive
environment
has the following effects on price strategy, operations, and management:
Strategy: Confirm any shifts in industry value curves and relative
competitive positions. The business may opt to continue previous pricing
approaches with manageable risk. Broad price increases become possible later
in the recovery cycle as demand increases solidify into robust backlogs.
Innovation becomes a lead effort to regain share and establish new premium
value products.
Price Structure: Businesses seek to reestablish preexisting
pricing relationships in their product lines. Distortions created through
excessive discounting practices are corrected on rolling basis through
announced price changes and contract renegotiations.
Pricing Operations: It is clean up time. Discount guidelines and
performance monitoring measures are reinvigorated, under a supportive demand
umbrella.
Pricing Communications: Focus is on reestablishing value delivered
to the customer. Innovation introduced into the market is used as the leading
"rally cry". Value selling reinforces differentiated performance
against competitive reference sets.
Pricing Research: The immediate focus is to understand shifts in
industry value curves and competitive market positions. Research then moves to
support price gain actions through innovation introductions or new
service/product bundles.
Financial Measures: Integrated SIOP, Sales/Inventory/Operations
Planning focuses on ensuring factory capacity loading supports desired share
positions, while price minimally offsets forecasted cost changes.
Competitive Behavior: May resume as was prior to the downturn.
Discount pressures ease as share positions are solidified and perceived
backlogs are "healthy". There may be disruptive shifts in industry
positions due to cash flow & technology advantages garnered.
In our next post, we will examine detailed effects of U and L
shaped recoveries, as these present very challenging situations.

Joseph V. Marigliano, Partner
Transcend Strategic Consulting
866-294-1916
www.transcendstratconsult.com

About the Author:
For more information please visit Price and the Recovery: A Tale of 5 Kingdoms, Pt 4

Article Originally Published On: http://www.articlesnatch.com

Tags: strategic

, pricing

, financial

, engineering

, cash

, flow

, improvemen

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