The Downturn Pricing Playbook (Never Drop the Price)
Three moves that protect price integrity in a recession: de-feature, non-pricing actions, change the model.
- Difficulty
- Moderate
- Time to result
- ~months to results
- Steps
- 3
- Confidence
- 91%
When the economy slows, the instinct is to discount. Ramanujam's rule: a discount today is your new price in six months. Instead, hold price integrity with three moves — keep a de-featured, less expensive alternative in your back pocket to catch churning customers, deploy non-pricing concessions (more product, longer contract terms, better payment terms) that preserve the price, and use the downturn as the moment to switch to usage- or outcome-based pricing, which is far easier to sell when customers are under-using.
Origin
Madhavan Ramanujam's recession advice on Lenny's Podcast (December 2022), drawing on Simon-Kucher's downturn work; the non-pricing-actions concept is also covered in Monetizing Innovation. Simon-Kucher colleagues Adam Echter and Ann Herrmann separately published a book on pricing during inflation.
Core principles
- 01Any price discount you give becomes the new price six months later.
- 02Never give a discount without taking value away in exchange — that exchange is price integrity.
- 03A de-featured alternative is a churn-catcher, not a downgrade you fear.
- 04Non-pricing actions (product, terms, payment schedule) let you concede without touching the price.
- 05A downturn is the cheapest window to change your monetization model, because the model change benefits the customer at that moment.
How to run it
- 1
Build a de-featured, less expensive alternative and hold it in reserve
Strip features from your current product to create a cheaper SKU. Don't market it broadly — hold it for the moment a customer says they can no longer afford you, then move them onto it to stop churn.
Pro tip You are exchanging less value for less money. That is a defensible discount and preserves your price for everyone else.
Watch out Just cutting the price with no value exchange is the absolute worst thing you can do — to yourself now and in future.
- 2
Deploy three non-pricing actions instead of a discount
Give more product at the same price (upgrade a loyal customer to the professional tier for a year, then renew at the higher price); change contract terms (trade a concession for a two- or three-year commitment); change payment terms (move from 15-day to 30-day payment).
Pro tip Giving away a better product for one year at the same price sets up a natural, higher-price renewal conversation.
- 3
Use the downturn to switch to usage or outcome-based pricing
When customers aren't using the product, a shift to usage-based pricing looks like a gift — they pay less because they use less, so they opt in. When usage recovers, you are already on the model you wanted and capture the upside.
Pro tip Trying to make this change in good times means fighting customers who want the fixed price. The downturn is when they volunteer for it.
In the wild
A software company selling to hair salons priced per seat, which made sense until nobody went for a haircut during the pandemic. They changed the model to charge on a per-haircut basis, so salons paid only for the activity they actually had.
→ Customers stayed, and when volumes recovered the per-haircut model recouped far more than the old per-seat model would have — because usage is where the value was actually being derived.
Ramanujam observes that ~90% of companies claiming a land-and-expand strategy are only landing. They gave too much away in the land, so there is nothing left to expand into — the entry-tier giveaway problem playing out over the customer lifecycle.
→ The fix is the same discipline: preserve value in the entry product so the expansion motion (and any downturn concession) has room to operate.
Common mistakes
Rushing to a price discount
A discount with no value exchange resets your price permanently. Six months later, the discounted number is what the customer expects to pay.
Having no cheaper SKU ready when churn arrives
Without a de-featured alternative in your back pocket, the only lever you have when a customer says they can't afford you is a discount — the one thing you shouldn't give.
Waiting for good times to change the pricing model
In good times customers defend the fixed price they know. The downturn, when they are under-using, is the window when they will actively opt into usage-based pricing.
Is it for you?
Best for
Founders and revenue leaders facing churn and downgrade pressure in a recession or budget freeze, especially in B2B SaaS.
Not ideal for
Land-grab moments where deliberate below-cost penetration pricing is the strategy and price integrity is not yet the goal.
From the transcript
“give them the lesser the Lesser expensive alternate keep them in the system”
“before you price discount think about what value can you exchange to actually justify that price discount”
“think about three non-pricing actions that you can do”
“90 of customers or you know people who we meet who claim to have a land and expand strategy are only Landing they're not expanding…”
From the episode
The art and science of pricing
Madhavan Ramanujam (Monetizing Innovation, Simon-Kucher)