It's OK to Raise Prices During a Recession

Going lean and slashing prices doesn't work for many companies.

August 26, 2010

As economic turmoil continues, many companies are reconsidering their strategies with an eye toward going lean and slashing prices.

And that might work for a few companies—but not many. Instead, companies should compete “on the basis of initiatives for which their customers willingly pay higher prices,” says Harvard Business School’s Frank Cespedes.

“Competing on price is ultimately a bet on your cost position,” he says.

Cespedes co-authored a paper called “Performance Pricing in Tough Times” with professors Benson Shapiro and Elliot Ross.

In a recent interview the researchers discuss pricing strategy and what ingredients are necessary to convince customers that higher prices are worth the cost.

Read the interview.