With the current U.S. inflation rate rising to 8.5% and the Consumer Price Index rising faster than it has in 40 years, businesses must consider reassessing pricing strategies. Under these inflationary conditions, companies struggle amid a vicious cycle of supplier price increases that they then pass down onto their customers, which in turn spikes labor costs, as would-be employees need and expect higher wages to compensate for the rising cost of goods.
Yet leaders can leverage the value they provide to customers to navigate these conditions without losing customers or hiking up costs. Rather than harm customer relationships, comprehensively discussing pricing issues with customers and addressing their own challenges can actually strengthen those relationships. While inflation can pose many problems for pricing, these circumstances also represent an opportunity to develop and improve better pricing strategies for the future.
Structure Pricing to Drive Healthy Profit Margins
Companies and their leaders may find that once-reliable pricing strategies are no longer viable. For example, recurring revenue-based businesses with customer contracts that span several years may see those contracts struggle to keep up with rates of inflation, as an agreed-upon price from three years ago fails to match the needs of today. Passing along a pricing increase mid-contract could be met with negative feedback, so...