From vanishing snacks to your shrinking wallet, everyone is making tradeoffs currently due to shrinkflation. What is the impact of shrinkflation on the brand? And what role does pricing have to play in it? With increased awareness and proactive measures, we can reduce the impact of shrinkflation on our everyday lives and businesses, as the author explains.
Some companies (and their customers) are tired of playing the “inflation price update” game: trying to determine how much input costs have actually increased and then trying to determine how much of that cost can be passed on to customers. As a result, some companies have decided to opt out of as much of this game as possible by updating their pricing models to include a commodity index, as the author explains.
In an environment of entrenched inflation, those companies that can execute fast on price adjustments/increases will become the fittest to overcome the challenge. Reacting means already losing margins, and potentially even business and competitiveness. Managing in anticipation and swift execution are key to coping with an inflationary business environment. That said, price adjustments need to be fair, evidence-based, and transparent, and they need to be tuned to that level which allows for good competitiveness. This demands a high level of business agility, as the author explains.
Looking for a practical, concrete guide for agile actions relevant to your business? “Beating Inflation,” the new book by Hermann Simon and Adam Echter, gives you the best of both worlds: real-life experience from pricing professionals and state-of-the-art knowledge and research that successful companies are implementing today. In this article, author Adam Echter presents several of the key takeaways from the book that pricers can begin implementing to fight the current unprecedented levels of inflation.
The U.S. and global economies are going to slow down, and it is not the end of the waves of disruption we have seen over the past 5 years. Companies must develop costing and pricing skills to manage constant business volatility, as the author explains.
Price adjustments due to inflation call for nuanced approaches that, when done well, can strengthen customer relationships and overall margins. Simply raising prices amid inflation has the potential to hurt customer relationships. Opportunity exists to forge a new partnership with customers, helping address their pain points while preserving margins. There are five key ways for companies to ADAPT to sales-led pricing while maintaining long-term value, as the authors explain.
In several countries, you can observe inflation rates that are higher than the ones in the 1950s: an all-time high within the last 70 years! This requires quick adjustments to leadership and management practices and to the way pricing and revenue models are managed. the authors propose 6 core topics to shape your strategy to succeed in these turbulent times.
Did you find the last two year’s negotiations tough? Then brace yourself for the next round. So far, the direction has been clear: prices needed to increase to absorb the costs of disruptions in global supply chains. Guarantee of supply was the most important value-driver for many customers, which meant that sellers could successfully pass on their cost increases. However, as a second wave of cost increases has hit the markets in the form of rising energy costs, and as consumers are demanding higher wages as a result, a wage-price spiral is beginning to take shape. This means high inflation rates will be with us for some time and companies should prepare their commercial strategy accordingly.
Over the last three months, we’ve begun to see revenues rise and demand flatten as the pricing decisions made a year and a half ago work their way down to customers. How can companies manage rising inflation and a shortfall in goods without experiencing degradation in margins or revenue (especially when products can’t be produced due to commodity shortages)? We recently met with pricing executives from around the globe to discuss pricing strategies in light of current inflation and the looming threat of recession. Here are six key takeaways from those discussions.
The U.S. economy continues to throw off mixed signals. But one thing is becoming clear: executives should prepare for an extended period of higher interest rates. This article was originally published on September 16th, 2022. This article represents views from McKinsey’s Risk and Resilience Practice, Strategy and Corporate Finance Practice, and McKinsey Transformation.