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100 Managing Customers Through Economic Cycles

customers, was starting their Christmas season discounts at
50% and adding another 20% discount on top of that for
a series of one-day only sales to drive volume with little
regard for margin.

For a high-end tour operator, they took a similar
approach to protecting not only their margins but their
message of a quality product. Their segment was family
vacations starting at $10,000 and up. They made the con-
scious decision not to change pricing whatsoever. A large
part of this was sending a message to the marketplace that
their product was of high quality and that their prices
would continue to reflect that quality. They did have a
reasonable reduction in bookings but still the business
stayed viable. During the economic contraction, they had
to transition from a business growth strategy to a sustain-
ability state strategy which meant scaling down organiza-
tionally. All of their moves to create standard sustainability
were done with the consciousness of not affecting service
levels to their guests.

Even some high-quality retailers come to the fear in the
retail marketplace. Nordstrom was a retailer with a long-
standing reputation for high quality with major sales events
only occurring notably two times a year. They broke this
long-standing market position with taking markdowns
almost the entire month of December. Saks Fifth Avenue
took a similar path in aggressive markdowns starting in
the second week in December, e.g. a $600 raincoat
for $179. These retailers drove volume with the discount-
ing strategy but likely experienced brand damage because
of it.

Pricing strategies are many times determined by underly-
ing infrastructural costs, i.e. what it costs to open the doors
every day for destination cities like Las Vegas. Pricing strate-
gies that were in place had little relevance to the severity of
the last downturn. Instead of heavily discounting hotel