As we approach the general election this November, one of the key issues that candidates are scrambling to find answers for is inflation. With the cost of consumer goods going up (according to the U.S. Department of Agriculture, the all-food Consumer Price Index (CPI) rose by 25% from 2019 to 2023), many shoppers have been forced to price shop rather than choose their favorite brand. In fact, according to a report on Today (August 29, 2024), data showed that due to inflation, consumers are actually developing new spending habits, and are no longer committed to brands, but discounted prices. So, how can you protect the brand you’ve worked so hard to build with unique pricing strategies during inflation?
- Get out the Sharpie and start slashing prices to stay competitive?
- Put less of your product in the package so that you’re selling less for the same price (sometimes called “shrink-flation”?)
- Lower the quality of the product so that your costs go down and you can sell it for less?
- Stop advertising efforts altogether?
No, no, no, and NO!
Stay true to your POSITION.
Unless your brand’s position is “always lowest prices” (like Walmart), you may be tempted to start cutting prices and margins — one of the common pricing strategies during inflation. That can be risky, especially for luxury brands that have traditionally cost more. If consumers see that you can now sell your product for less than before and still make a profit, they’ll feel scammed. Even during a recession, it’s best to stay true to your brand’s position. Your loyal followers have fallen in love with your brand for that reason, so try to resist abandoning it when things get a little tough. When people truly love a product, they’ll bargain-hunt for things like toilet paper and toothpaste, just so they can get their favorite $7 cup of coffee.
Get creative with product INNOVATION.
Let’s say your product is thick, rich pasta sauce. Don’t be tempted to “water down” the recipe as a pricing strategy during inflation. Instead, try getting creative with the way you package your product, sell your product, or even extend the use of your product.
- New size options: If your customers suddenly can’t afford the 32-ounce size of your product, perhaps you can offer a 24-ounce version in addition to the larger size. Most customers would choose to put a little less of their favorite sauce on top of their pasta than a cheaper brand they don’t like.
- Trial offers: Perhaps there ARE some customers who simply can’t afford to buy your product any longer, even though they love it. Now’s the time to find new customers who CAN afford it. Introduce your product to those new targets with trial offers, taste tests, co-op marketing, and other tactics that get customers to experience what they’ve previously been missing.
- Line extension: Rather than looking for ways to cut costs, what if you developed a new “special reserve” ultra-premium line of your product instead, that makes the price of your “regular” product not seem as expensive? Consumers are obsessed with new and unique products, and this may be a tactic that adds a whole new “luxury buyer” subset to your customer base.
Keep MARKETING.
As a pricing strategy during inflation, you may be tempted to employ extreme cost-cutting measures, including your marketing budget. However, keep in mind that advertising is a critical component of brand awareness, market share, and reinforcing your brand’s position in the mind of your customers. Even during economic downturns, companies can enjoy an increased share of voice by advertising while their competitors cut back or go silent.
But I thought you said…
Okay, we’re going to contradict ourselves here, and say “offer discounted pricing,” but only if competition demands it. You don’t want to get into a price war, but a brand leader can sometimes go for stretches of time with lower prices just to hold onto existing customers. You may be able to accomplish this by reducing the price on a few higher-margin products or offering price promotions like “buy one, get one at 50% off.” The goal is to not create an expectation of low prices all the time, especially when the economy turns around.
As the nation’s leading positioning ad agency, Innis Maggiore is ready to help you develop pricing strategies during inflation, or position your brand if you don’t currently have one. Contact us for more details on these ideas and more!