Paying the Price for Recession – insights from Martin Scott 

Martin Scott, Partner, Head of Operational Strategy Group, KPMG LLP (UK)

“Getting pricing stabilised, and getting pricing right, are critical items on the agenda of CEOs and Management Teams today.  In a pre-recessionary world, pricing was important but not critical.  The agenda then was all about growth – it was about market share, it was about expansion in a booming market place.  When we moved in to recession, pricing became a vital lever applied very, very quickly.  It was all about survival: How do we discount?  How do we reduce our pricing structures so that we can somehow hold our market share steady, and maintain some degree of profitability in a very, very turbulent time? 

We’re through that time now, and we’re in to the post recessionary world, and Management Teams are having to ask themselves: What do we do now? Do we have our pricing right?  Do we understand who our customers are? Do we understand what we need to do to maintain a sustainable level of pricing to give us profitable growth in a new world?

We believe the pricing structures inherited from the recession are a major challenge to Management Teams in the UK today.  Two thirds of the teams that we’ve spoken to have told us that they don’t think that these recessionary-driven pricing structures are sustainable going forward, from a profitability point of view, and they’re not aligned to their long term strategies.

Furthermore, these pricing structures, while necessary at the time, may have fundamentally moved their positioning in their markets and changed their brand perception. 

A major hurdle is getting control of pricing.  A number of the management teams that we’ve spoken to feel that they don’t yet understand the metrics, the measures and the controls they need to have in place to accurately control and adapt pricing going forward, and that’s a major problem for them.

I think one of the things that would be keeping me awake at night if I were a CEO today, is - do I now have the wrong customers?  Do I understand how my customer base has changed from a recessionary time in to this post-recessionary, austere world that we’re going to live in for the next number of years?  Understanding this customer base, understanding where profitability and value will come from, and understanding how this customer base is going to react to new products and new pricing strategies, I believe will be a make-or-break factor for UK businesses in the coming years.”