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Be Prepared for the Next Pricing Emergency

In the pricing world, we often make plans expecting that this year will be a lot like last year. That next month will be a lot like this month. That things are going to go along much like they always have.

That approach works great — until you experience a major unexpected event.

Right now, we’re in the midst of just such an emergency.

It’s frightening.

But it’s not the first time the world has experienced a crisis. And some of these past emergencies hold some lessons for us about how to deal with the current situation — and plan for the next one.

In a 1985 article for Harvard Business Review, Pierre Wack shared a planning technique that had worked well for Royal Dutch/Shell. He wrote:

Beginning in the late 1960s and early 1970s, Shell developed a technique known as “scenario planning.” By listening to planners’ analysis of the global business environment, Shell’s management was prepared for the eventuality — if not the timing — of the 1973 oil crisis. And again in 1981, when other oil companies stockpiled reserves in the aftermath of the outbreak of the Iran-Iraq war, Shell sold off its excess before the glut became a reality and prices collapsed.

The planners at Shell accepted the reality that big surprises are inevitable. Then they thought through some of the most likely surprises and come up with a response.

Of course, no one can be prepared for every eventuality, and we all really hope that worst-case scenarios never come to pass. But having a procedure and preparations in place makes it much easier to deal with the emergency when it actually happens.

We’re used to seeing this sort of emergency preparedness in other aspects of life. Your office building probably does fire drills. Your IT department probably has a disaster recovery strategy. Depending on your location, your community’s first responders have policies for handling fires, floods, earthquakes, tornadoes, and/or hurricanes. Your local newspaper has obituaries for famous people almost ready to print whenever their demise eventually occurs. Some politicians even devised proposals for responding to a global pandemic like the coronavirus.

In pricing, we need to be prepared for the inevitable eventualities as well. What are the next steps if there’s a large supply disruption? How should you respond if a price war begins? What should you do if customers have a spending freeze?

Having a plan means that when something bad happens, you don’t have to think about what to do next. Human beings do not do our best thinking under stress, so having a pre-made strategy makes it much more likely that we will respond well and in a timely way.

And fortunately, you don’t have to do all this planning and strategizing on your own. PricingBrew is full of resources to help you cope with the current emergency — and the inevitable next one. Here are some places to start:

Start preparing now for the next emergency — your future self will thank you.

We hope that you and your families are well. Stay safe!

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