Finance Recessions

How to Form an Effective Pricing Strategy Following the 2024 Recession

By ITR Economics on August 30, 2023

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ITR Economics is the oldest, privately-held, continuously operating, economic research and consulting firm in the US.

ITR Economics has been forecasting a macroeconomic recession that will begin at the end of 2023 and continue throughout 2024. Although we continue to help businesses prepare for this period of economic decline, we are always looking toward the future. So, what lies beyond 2024, and what can you do now to set your company up for success? ITR Economics is here to help you form an effective pricing strategy for the period following the upcoming recession.

What You Need to Know

Right now, the US economy is experiencing disinflation, which will continue throughout 2024. With disinflation, the rate of inflation is slowing down. While prices will continue to rise, they are rising at a much slower rate than during an inflationary period. Outright deflation, or price decline, is a factor in some areas of the economy. For instance, the US Truck Transportation of Freight Producer Price Index is 12.4% below the year-ago level.

Once the recession ends in late 2024, we are expecting the economy to bounce back; ITR Economics is forecasting 2025 to be a period of economic growth.

However, once the economy picks up, so does the demand for goods. The increased demand for goods will contribute to a return of inflation.

As demand goes up, tightness in the labor market will become more severe, with a commensurate increase in the cost of labor. With increased demand for products and increased labor costs to create and distribute these products, the cost of goods and services will also increase.

[ Download our 2024 Budget Planning Checklist to Assist you This Budget Season! ]

Which Products Sell Better in a Period of Inflation?

Consumer behavior can be influenced by several factors. Whether it is during a time of recession or as a result of high inflation, business leaders must keep in mind that consumers will tend to gravitate toward the “good” and “better” products rather than the “best” ones. The value proposition becomes key as goods and services become harder to afford. Executives and CEOs need to be ready to shift their focus to the products that are selling the best during this time.

When building an effective pricing strategy, you need to consider the following:

  • Service price point
  • Profitability price point
  • Consumer acceptability price point

Keeping these key elements in mind, while maintaining great efficiency in your organization, will help lead you to success. If you struggle with or fail one of those key considerations, you could find yourself with a real cash problem.

Finally, knowing when the recession will begin and end is not enough; you also have to know when it will impact your business. A recession does not impact all industries simultaneously. Be sure to contact us at ITR Economics – we can help you identify your place in the business cycle so you can plan effectively for the years to come.

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