Value Charts, Pricing & Cash Flow: Three Aspects to Focus on in the New Normal

To succeed in the "new normal," i.e. that period after the economic recovery, businesses are going to have to make new assumptions and take new approaches to their businesses. Media properties, for example, can't expect that a recovery will lift them back to the good ol' days of 2006-2007.

That's certainly true when it comes to the strategies and tactics companies should deploy as part of their PR initiatives.

While I generally address the media and PR, in this post I thought I'd quickly address three critical success factors for companies that want to survive in the new normal.

First ideas came from Norm Brodsky's excellent book, The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up. Brodsky is a serial entrepreneur -- actually a concurrent entrepreneur, running several businesses at the same time -- and a columnist for Inc. Magazine. According to Brodsky:

• Protect your capital. Spend it only on things you're certain will generate positive cash flow in the short term.
• Maintain the highest monthly gross-profit margin you are capable of achieving. Do no go after low-margin sales. It's too much work and costs too much money to chase low-margin customers.
• Spend time developing relationships with your highest-margin customers. Let low-margin customers come to you, and negotiate the price up.
• Balance the need to make the sale with an understanding of the risks and costs involved.

I subsequently found a blog posting from LeveragePoint, a Cambridge consultancy that helps its clients evolve their marketing strategies, about Value Charts.

We've met with LeveragePoint, and are impressed with their intelligence and insight. Its blog on Value Chart brings an interesting perspective on developing "value models that clearly show how much economic value your customers get" from using your offerings. The article, "Using Value Charts to Plot Pricing Strategy," looks at four key scenarios:

• Premium Strategy: in which the customer is "willing to pay more because they perceive higher economic use value." This can help you achieve Brodsky's goal of selling at the highest margins you can achieve.
  
• Penetration or Discount Strategy: in which the company decides to aggressively grab market share with a low price.
• Neutral Strategy: In which the company selected a price equal to its competitor with the goal "to be the preferred vendor because of better differentiation."
• Low Cost Leader: "essentially a more extreme form of Penetration Pricing... Obviously this strategy can only be sustained with a significant cost advantage."

For more insight on this topics, check out Brodsky's book and LeveragePoint's blog.