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How to Raise Prices and Increase Revenue in a Financial Crisis

For many C-level executives, a proposal to increase prices during a financial crisis will generate looks of disbelief and challenges to the perceived sanity of the proposer. Yet, some organizations can follow this action plan with impressive success.

How is this possible? A combination of art, business, and science can achieve this seemingly unreachable goal. Courage and creativity are also required in the mix of factors involved.

The Theory

First, the idea appears. Then, the theory forms. Finally, the action plan and activity commence. This sequence occurs in all business innovation, as experienced senior executives are aware.

Raising prices during a financial crisis is the premise of “Performance Pricing in Tough Times,” the well-written theory of authors Frank Cespedes (senior lecturer, Harvard Business School), Benson Shapiro (marketing professor, emeritus, Harvard Business School), and Elliot Ross (president, MFL Group, Ohio). In this piece, the authors discuss the concepts of pricing strategy and the required components of convincing your customers that higher prices are worth paying to increase their satisfaction.

This theory has proven to generate many successes. However, like some gastronomical delicacies, e.g. octopus, this approach is not for everyone. For example, those companies whose operating core is a low-priced business model and strategy, often find it difficult or impossible to execute this strategy.

For example, the hugely successful Walmart spends large advertising dollars hyping their famous “rollbacks” of former prices. While this attracts more customers, improves inventory turnover, and generates solid revenue, this strategy makes it difficult to infuse a widespread pricing increase for any reason.

However, other organizations are often more fortunate. Through market awareness, identifying conditions that may encourage customers to buy even at higher prices, and creating the perception of added value, you might enjoy an opportunity to increase prices and revenue in the darkest of economic times.

Key Factors in Successfully Raising Prices

  • Pricing alone can create or diminish value faster than any other strategic action you take. Understand the truth about pricing. While all seasoned senior executives are well acquainted with various pricing cause and effect scenarios, they sometimes overlook the core truth. A down economy only maximizes the effects, good or bad, of a price change. Senior management must carefully consider multiple pricing strategies before implementation.
  • Cost of goods is the primary profitability factor, not selling price. Whether your company operates in a “retail” environment or not, this wise and proven truth still applies: “It’s not the price at which you sell your products that determines profitability, but how much you pay for them.” This rule does not require you to purchase raw materials and products at the lowest price on our planet. It does suggest that you obtain that which you need at the lowest price your immediate competition is paying.
  • Adopt a “performance pricing” philosophy. Just as basketball and football wide receivers always attempt to “create space” between themselves and their defenders (competition?), performance pricing involves space creation. In this context, to achieve maximum customer benefit and profitability, create “space” between the “value” of your product and the cost to obtain or create it. Establishing a higher value permits higher prices, as your customers purchase on value, not cost. This creates a classic win-win situation for both customers and company.
  • Merge (even just philosophically) your “cost counters” and “value generators.” Cost factors are typically the purview of your accounting and finance departments, while your sales and marketing staff are on a value generating quest. Professor Shapiro believes the only way to meld the cost and value components into a winning combination is to get both sides on the same page. Understanding the responsibilities of each group by the other helps foster a team concept to maximize performance pricing strategies.


This system will work in both consumer products and business-to-business (B2B) environments. While easier to announce price increases in “hot” economies, establishing added value for your products and services will permit you to introduce higher prices during financial crisis periods, too.

The harsh realities of a national financial crisis, fewer consumers and even fewer discretionary dollars to spend, are challenging for C-level executives. Adopting a total “bunker mentality,” however, can defeat even the most seasoned management team.

Unless you have hard, irrefutable evidence that price increases are impossible, consider a performance pricing strategy to improve, not just maintain, profitability during a financial crisis. Turn on your creativity. Ramp up your courage. Use your risk management expertise. If the key factors are aligned, develop a performance pricing action plan to achieve success in a down economy, while your competition concentrates only on survival.