Recession Customer-Investment Pricing
Shift pricing risk from customers to the business during economic downturns.
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 5
- Confidence
- 94%
This framework treats a recession as a signal to redesign the exchange of risk and value between a company and its customers. Begin by identifying how reduced budgets change customers’ willingness to commit. Then consider discounts, improved terms, larger bundles, consumption-based billing, or performance-based fees that make the company invest alongside the customer. The aim is not indiscriminate price cutting; it is to reduce the customer’s upfront risk while preserving sustainable unit economics. When customers pay in proportion to usage or demonstrated results, the offer becomes easier to justify during uncertainty. Businesses that deliver real value under these conditions can emerge with stronger retention, affection, and lifetime relationships after the economic cycle improves.
Origin
Extracted from Marketing Against The Grain through Kip Bodner and Kieran Flanagan’s discussion of how companies can adapt pricing during a recession.
Core principles
- 01Treat price and packaging as strategic growth levers.
- 02Invest in customers instead of extracting maximum short-term value.
- 03Align what customers pay with the value they receive.
- 04Use favorable terms to build loyalty beyond the recession.
How to run it
- 1
Assess Recession Sensitivity
Determine how reduced discretionary spending affects each customer segment’s willingness and ability to buy.
Pro tip Interview both customers who renewed and customers who recently declined.
Watch out Do not assume every segment has the same sensitivity to price.
- 2
Map Customer Risk
Identify the commitments, upfront costs, uncertain outcomes, and restrictive terms that make the offer feel risky.
Pro tip Separate financial risk from implementation and performance risk.
- 3
Choose an Investment Mechanism
Select a suitable mechanism such as a discount, favorable terms, additional value, consumption-based billing, or performance-based pricing.
Pro tip Prefer mechanisms that connect payment to realized customer value.
Watch out Blanket discounts can damage margins without improving loyalty.
- 4
Protect Sustainable Economics
Model the offer’s margins, service burden, cash flow, and likely retention before launching it.
Pro tip Set clear thresholds or limits that cap downside exposure.
Watch out An attractive offer is not durable if serving it creates a loss.
- 5
Measure Long-Term Value
Track adoption, customer outcomes, retention, expansion, and advocacy to determine whether the investment earns a lasting return.
Pro tip Compare cohorts exposed to the new pricing with customers on the previous model.
In the wild
A marketing platform replaces a large annual commitment with a smaller base fee plus charges tied to actual campaign volume. It also provides implementation support without raising the initial price. Customers can reduce spending when demand falls while retaining access to the platform, and the vendor shares in their recovery as usage returns.
→ The company reduces purchase friction while preserving customers who may later expand.
Common mistakes
Discounting Without a Strategy
Cutting prices across the board may sacrifice margin without changing customer risk or improving retention.
Ignoring Delivery Capacity
More generous terms or bundles can create an unsustainable service burden if operational costs are not modeled.
Claiming Unmeasurable Performance
Performance pricing fails when the parties cannot agree on attribution, outcomes, or the measurement period.
Is it for you?
Best for
It is best for businesses that can redesign packaging, payment terms, or pricing around measurable usage or outcomes.
Not ideal for
It is not ideal for businesses whose margins cannot support discounts or whose outcomes cannot be measured reliably.
From the transcript
“You need to think about how you are going to evolve how you price and package your business over a recession.”
“The companies that are going to win in a recession are going to be focused on how do they invest in their customers instead of…”
“There's consumption-based pricing, where you get paid based upon the amount your customers use you. Love that. And then there's performance-based pricing, which is what…”
From the episode
How to Beat the Recession