Page 129 - Accelerating out of the Great Recession

ACCELERATING OUT OF THE GREAT RECESSION

realize that opportunities exist for strategic pricing. These com-
panies must review their pricing structure to see where advan-
tages exist.
A good example of finding price advantages is U-Haul, the
truck rental company. During the 1989–1992 recession, U-Haul
adopted a lock-in and sell-up approach. As the downturn wors-
ened and customers became more price sensitive, U-Haul’s
margins started to suffer. It urgently sought alternative ways to
manage the downturn, and discovered a lucrative adjacent mar-
ket in the sale of high-margin add-on supplies for moving—
such as cardboard boxes, tape, and other packaging materials.
Once U-Haul had locked in customers with the truck rental,
it was able to leverage its position of convenience to sell
the add-on supplies at a premium. The impact was dramatic:
in an industry with an average operating margin of 3 percent,
U-Haul’s margin grew to 10 percent.
In the Great Recession, many companies have engineered a
downshift in the value and the prices of their products. One
food maker’s response was typical: in the autumn of 2008, it
introduced a new Ecopack product—a slimmed-down yogurt
container with less packaging and less yogurt—and charged a
lower price. But while the price tag was lower, the new yogurt
packages actually cost consumers €0.06 (4 percent) more per
kilogram.

■ AFTER DEFENSE, THINK OFFENSE ■

Surviving a downturn—whether the Great Depression or the
Great Recession—is not enough to win in the low-growth
economy that may follow. After attending to the basics—pro-

■ 108 ■