3 Pricing Actions to Consider During Inflation

We are facing the worst levels of inflation in 40 years. Raw material costs are rapidly increasing as are energy costs and supply chain costs.

Increasing your prices to maintain margins is tough both for you and for your customers. Businesses are worried about damaging relationships with their customers by raising their prices.

Many businesses we have been speaking to have NOT taken any pricing actions in several months and are experiencing margin erosion.

Here are 3 pricing actions that we have been sharing with businesses:

1️⃣ Review existing discounts being awarded to your customers.

Ask your team why are they giving these discounts and is it driving positive buying behaviour?

Discounts given at the end of a quarter to meet business targets will result in customers delaying orders to quarter end and changing their buying patterns in order to pay the lower price. It’s important that you challenge past practices.


2️⃣ Don’t focus solely on individual product cost changes and increasing prices on just these products.

Consider total customer and product profitability. Different customers will react differently to your price increases. Evaluate your customers’ end-to-end profitability and not just at the product profitability level. This will enable you to make price adjustments that have been thoughtfully considered and will go a long way in building trust with your customers in the longer term.


3️⃣ Evaluate your cost-to-serve your customers and consider different service levels.

Don’t apply a one-size fits all to servicing your customers. Consider applying fees and surcharges as well as minimum order quantity requirements. Charge for activities that place undue pressure on your business, like rushed deliveries.

What pricing actions are you currently implementing?