Chairman and co-founder of Dynamic mixing.
It is now clear to every individual in every role in society that the costs are going up – a lot up. The perfect storm of world events has resulted in the highest inflation rate since 1981, with entrepreneurs scrambling to make up for the difference in costs and profit margins. Small businesses, in particular, have been hit hard and the concerns are continuing.
The most common response to higher costs for companies is to pass those high prices on to their customers. This is an understandable and in some cases unavoidable reaction to inflation, even if interest rates are not record-breaking. But a price hike is far from the only tool available to struggling entrepreneurs. Charging more can help cover costs, but in an economy where everyone is concerned about adding up the numbers, it can also lead to customer loss.
Clearly, companies have to do something different to survive in an inflationary market. What that looks like depends on the business, what overhead costs are, what reserves look like, the ability to adapt quickly, and dozens of other factors. Whatever the solution, successful leaders have one thing in common: they put the customer experience at the heart of everything.
The same advice has been given many times before. One quote, often attributed to envelope mogul Harvey Mackay, simply says, “No business can stay in business without customers.” Knee-jerk reactions to a difficult situation can solve a short-term problem, but not considering how your customers’ experience is affected by the change is not a long-term strategy that will win.
How do you keep the integrity of your customer experience intact when prices spiral out of control? Here are three approaches to dealing with inflation aimed at customers, not dollar amounts.
Authenticity is a buzzword of the current decade. Consumers expect a more transparent and personal relationship with the organizations they do business with. Creating a successful brand today is as much about building a community as it is about building a product.
If those relationships already exist, customers know they can take your word for it. So when something like record inflation hits, the best way is to be direct and honest about the impact price hikes are having on the business and what that will mean for customers. In most cases, when customers can see the real reasons behind a price increase, they are less likely to get a negative response.
A little notice goes a long way here too. Explaining any changes in prices or services before they happen gives your customers the chance to make plans for themselves to reduce the impact. The bottom line is to treat people with respect.
Find ways to add value.
Price increases may be unavoidable, but if customers feel they are getting added value, they probably won’t mind the extra cost.
Be creative about what to contribute. If commodities are suddenly twice as expensive, how do you make that price increase worth it? For example, even small businesses have a variety of experts to handle day-to-day tasks. This expertise may seem mundane to everyone who works there, but to someone outside the organization, your team’s knowledge and skills can be invaluable. You can use this to your advantage by offering webinars, adding support, and assigning a dedicated team member to each of your customer accounts.
Another way to add value is by rewarding loyalty. If you ask more from your customers, can you give more in return? Bulk discounts, price breaks on long-term contracts, referral rewards, and frequent buyer programs can all boost your business and let your customers know you appreciate them.
Focus your efforts where they will do the most good.
I believe that every business should have access to a good cost accountant. If you can’t afford to hire one full-time, consider hiring freelancers or sharing them with other local businesses. Accounting software may help you organize your finances, but it is not a substitute for expert advice.
A cost accountant looks at all your financial data and finds ways to increase efficiency. They can help you determine which areas of your business are most profitable and which are not helping you achieve your goals. They can also tell you where a price increase will have the greatest impact.
It’s tempting to raise prices on every product or service you offer if you can get away with it, but this strategy won’t keep the customer experience intact. Instead, use the data to make smart decisions about how and when to raise prices. If customers can see that you are conscientious about where and how you pass costs, their impression of your brand will increase accordingly, giving you customers for life.
Changing and adapting is part of entrepreneurship. The economy ebbs and flows, and supply chains fluctuate. Even without global factors affecting the way we all do business, savvy entrepreneurs are constantly adjusting what works and what doesn’t. As long as you strike a balance between transparency, value-add, and a laser focus on data-driven decisions that keep the customer at the forefront, your business will not only survive this current wave of inflation, but continue to grow for years to come.