Hope you all had a wonderful summer and things are going well as we enter the homestretch of 2022.
The inflation we’re continuing to experience is somewhat relentless. According to the latest CPI report, the annual inflation rate is now an amazing 8.3%, higher than it has been in 40 years! And the stock market did not like this report, as it means the Fed is likely to significantly raise interest rates yet again.
In fact, central banks around the world are continuing to raise interest rates, prices of commodities are rising on everything, food prices are hitting record highs, and house prices as well as rentals are through the roof!
Many now also fear that we are soon going to be entering a period much worse than inflation…something called “Stagflation”. This is when not only do products and services keep going up in price, but at the same time, the economy slows down into a recession and companies start laying off workers. An even weaker stock market could also accompany this situation as well. Only time will tell…
But in the meantime, how can you manage your business going forward in such a difficult inflationary environment? What can you potentially incorporate into your 2023 marketing plans?
8 Powerful Techniques to Help Deflate Inflation!
- Streamline and Automate Processes – As the cost of labor continues to increase, have a look at your processes. Is there a way to automate something that is now labor intensive? For example, can you automate production scheduling? Can you use marketing automation to capture and process new leads, schedule e-mail distribution based on consumer behaviors, and automate social media postings? Businesses adopting these kinds of technologies will experience significant cost savings.
- Raise Your Price, But Upgrade Your Product/Service at the Same Time – That way, customers feel that they’re getting more for that extra money. You should look for ways of adding features, benefits or “bells and whistles” that cost you very little to add on to the product or service you’re offering, but create a “perception” of much higher value. And if you can tie the price increase to a “customer centric value narrative”, then you can not only avoid the customer’s wrath, but you may actually come out ahead of the curve. If you provide a vivid and compelling story for why the price is being increased that focuses on better customer value, and puts the customer at the center of the price increase story, you may come away unscathed. The important point here is to actually provide some additional value (albeit at a higher price for the customer) in order to eliminate the perception that they are paying more for basically getting the same product or service they’ve been getting till now (at a lower price.)
- Monitor Your Competitors – What are they doing with pricing? Pick 3 or 4 competitors and track their prices over time to give you data that you can use to benchmark your business against them. And if everyone is taking price up, this data provides a great “sound bite” to use if your customers debate you on why you are taking your price up.
- Better Articulate Your Value Proposition And Brand Positioning So You’ll Be Worth A Higher Price To Your Customers – We do positioning strategies for many clients every year. Ask yourself…When selling or marketing your product/service, what do you say about it? What are your core benefits? What do you makes you truly unique and special? Are there “non tangible” benefits you can tout? And what do your key competitors say about their products? What is your value proposition that makes you worth buying vs. your key competitors? Are you healthier? More socially responsible? And how do you articulate that “story” clearly and succinctly so it’s easy for the customer to see what extra financial value it brings him/her. If the customer truly understands the “value” of what you provide, then even if you raise your prices, your price increase will be more tolerable to them.
- Go “Fractional” – If you’re low on cash because of increased cost of goods or labor costs (due to inflation), you should ask yourself if you can hire an outside CFO, CIO or CMO to work on a “fractional” basis (e.g. 5 or 6 days per month) to oversee key strategic and financial thinking and planning at a fraction of the cost of a full time executive. And you can add more days of work (or subtract less days) whenever you need them. By combining the high level thinking of a former big company “C” level executive and the executional capabilities of a more junior internal person, you could experience increased revenue/valuation growth, but at much lower and flexible employee labor costs…leading to lower fixed costs and increased profitability.
- Consider “Shrinkflation” – Have you recently noticed that your jar of mayonnaise used to have 16 ounces, but now it has only 14 ounces? This is called “Shrinkflation”. Instead of raising the price of a product, companies just give you less of it, so it is sort of an indirect form of inflation. For your business, you might consider telling your customers that you are now giving a bit less product per box or per jar (people are less “quantity” sensitive than they are price sensitive). Or consider “unbundling” an existing product or service by taking away a few features from the existing version, and charging extra for those features for people who want them (Think airlines who used to allow free checked luggage, but now charge extra for it).
- Leverage the Topline to Build the Bottom Line – Digital can be used in creative ways to grow revenue. If you end up selling more products, your fixed costs will get spread over a wider range of products sold, thereby lowering the costs for all of those products. Start with low hanging fruit such as organizing buyers in your customer database and e-mailing them about your newest products or providing incentives if they buy soon.Then think about new approaches such as leveraging relevant influencers on Instagram, LinkedIn or Twitter to support your brand. I’m recently worked with a few clients who have been extremely creative working with influencers (via humor and the like). Finally, if you’re in the food business, explore buying ads on Instacart to support consumers who want products delivered to their home. Covid has helped home delivery explode exponentially, and this is a great new channel for anyone to drive more business.
- Upsell and Cross Sell – I often tell clients that these are two of the most powerful profit drivers, yet many companies don’t do either of them especially well. “Upselling” is when someone wants to buy the $250 item, and you convince them to buy the more expensive $400 item. If the $400 item has a better margin (which it usually does), you’ve not only increased profits, but you just increased revenues by +60% as well. “Cross selling” is when they buy one item, and you convince them to buy a few others as well. Think car dealers. Once you decide to buy a new car (if you can find one anywhere!), the dealer will try to cross sell you other items such as a leather seats package and a long term warranty.
The Bottom Line
Inflation is worrisome to everyone. It will likely be here for a while, so every business owner and management team needs to seriously explore how to manage this difficult issue…or you risk diluting your margins and profits. Try to think about how you can incorporate some of the aforementioned strategies to develop your go forward game plan for late 2022 and into 2023. And get outside help if you need it.
So until next time, good luck and good selling in the rest of 2022…
Have a happy fall season and please stay safe and healthy!