Capturing Opportunities In The Inflation Economy
The impact of covid-19 combined with the Russia-Ukraine war has devastated the global economy. Lack of enough industrial production and the shutting down of many businesses all through the pandemic times have led to the inadequacy of supply and thus incapability to meet the increased demand for goods. This gap along with the hike in energy costs triggered by the Russia-Ukraine conflict has ignited high inflation. And this inflation is likely to persist in 2023.
This is not good news for businesses. Because now they have to struggle with escalating input costs and diminishing the spending power of the customers. However, businesses must realize that every now and then, they have to battle challenges and tough times in order to survive.
So, to thrive right through this flaring-up inflation businesses must consider it as an opportunity to re-evaluate and streamline business processes and workflows, and invest in innovation and technology that can boost output and efficiency.
Let’s go through some of the ideas businesses can implement to get ahead and be successful in this inflation surge.
Adopting digital technologies is a great way to counteract the unfavorable impact of inflation. It helps in improving cost-efficiency by modernizing outdated legacy systems. It supports by enhancing workflow efficiency and automating tasks, which means productivity gets better.
Going digital during rising inflation can be advantageous. Businesses across the world making digital transformations have raised the customer experience standard very high. Keeping up with the increased expectations of the customers is important to stay ahead of the competition. Organizations leading the digital transformation tend to have lower expenses in doing business and it is one of the benefits of the current inflationary situation.
Digital technologies not just improve business efficiency but also aid in analyzing and making the most of the data collected. It can help business people in informed and accurate decision-making.
Such digital transformation efforts have a long-term positive impact on business costs, product prices, and services. Overall, it can boost profits and revenue as well as drive business growth.
Employing Dynamic Pricing Strategies And Tactics
Rather than increasing the price of the products to cope with inflation, adopting dynamic pricing is a wiser option, especially to retain price-sensitive customers. The price of any product hinges on a number of variables such as changes in the market, rise and fall of demand, prices of the competitors, etc. Businesses can have the option of altering their inflationary price response by customer and product segment and study both margin performance together with the customer’s willingness to pay. Performing this precise approach could help with gaining profits and making good customer relations. Changing the price for the product or service as per the fluctuations of those variables allows businesses to adapt and be agile even if inflationary pressures occur.
It lets the customers purchase the products at the best deals during financially pressing times and thus supports businesses in retaining their customers. Additionally, it can benefit businesses by preventing them from price gouging as well as price deflation, thus beating the competition lucratively. This ultimately carves the path to long-term success.
However dynamic pricing can be a cumbersome and time-consuming task if done manually. So, it takes AI-based software to automate the task effortlessly, and consistently.
Reconsidering Product Offerings
Certain products or services are more prone to inflation than others. At this time of inflation, companies should consider downgrading products so they would not have to change prices. Customers consider pricing meticulously but may not sense the small changes may it be size, weight, or the packaging of their purchases. Taking off such underperforming products or services can facilitate dealing with inflation effectively. Because, by doing so businesses incur lower overhead expenses, create an efficient marketing plan, and cater to a more specific customer base.
Also, it can help in directing focus on those products that have the probability of fetching more profits.
Personalizing The Customer Experience
Customers feel valued if they receive service customized service to suit their needs and preferences. Taking customer service for granted can be a risk to any business’s value because they tend to be more loyal to the companies offering them personalized experiences. Countering price increases while reducing efforts in service and experience can push away existing and potential customers.
To offer such high-impact personalized service, companies must undertake a customer-centric approach. Also, the service delivered must also be prompt, responsive, friendly, and pertinent to customers’ individual preferences.
Considering Supply Chain Optimization
Supply Chain disruption is bound to happen when inflation flares up. Inflation equates to a limited supply of goods during increased demand for those products, which may be a need or a want. However, the optimized and resilient supply chain can help businesses not only mitigate the supply chain disruption but also support them to thrive by means of innovations that spring up growth.
Utilizing a supply chain platform is a great option as it integrates all the resources, data, processes, and technology in such a way that everything is centralized and can be accessed in real-time, online. Supply chain and procurement also should play their part by being resilient and by serving as coordinators between suppliers and businesses.
Adopting New Business Model
This is a strategy applied by many successful companies in the past, during the Great Inflation in the 1970s.
To start with, the existing business model must be analyzed to figure out the flaws in it to ensure that the new model does not replicate the same. Since the markets are changing constantly, the major trends of the markets must be scrutinized and utilized. Inflation can make customers switch preferences in order to make the best use of their purchasing capability. This simply means that they tend to consider their expenses and needs and this can be an opportunity for businesses to launch new products and remove the slow-moving ones to match their customers’ preferences.
To develop a winning business model the company must have an in-depth understanding of its customers and must consider them as the main aspect. So, detailed customer research plays a huge role in this.
The data obtained by thorough customer research is like a magnetic compass and steers the business owners in the right direction and helps them make well-informed decisions so that the chances of failure are trimmed down. It is equally important that the newly innovated business model does not drift away from the original business the company is actually in.
Promotions are a great way to help businesses walk on the thin line of setting prices that hold margins without hurting the customer relationship. Customers are big fans of discounts even during a healthy economic situation and in economically hard times, the majority of customers count on companies that offer them promotions and it makes them feel that the particular brand cares about them and so they remain loyal to such brands even when normalcy returns.
So, businesses can go for loyalty programs devised to get returning customers. Product bundling is another option to increase sales by stirring the customers to buy more to save more. If personalized it can satisfy the requirements and preferences of customers and can be an immensely valuable opportunity to cross-sell and up-sell. Increasing the transaction size and frequency of the existing customers can enhance profits and grow the business explosively. Another way is to pinpoint where else the customers are spending and then target these products accordingly. Once these goods have been identified, discounts and promotions can be given to such products if it’s existing in the business’ products list, or look for a supplier who can give you a good bulk price and then promote it.
By applying innovative ideas as well as the right strategies, businesses can find opportunities in adversity and navigate smoothly through tough situations like inflation. It also prepares them to understand and adapt to the instabilities of the economy. It also trains them to be more nimble and powerful, instead of getting succumbed to challenging situations.