Increasing Business Prices with Rising Inflation – 31/05/2022

Accounts Navigator

If you are a business owner or entrepreneur, one of the most critical questions you’ll find yourself having to answer is: how should you price your products or services? Balancing profit margins, customers’ expectations, and value for money can be extremely challenging. And it is certainly even more so in today’s economic climate. 

While it is true that the economy is quickly bouncing back from the pandemic-induced crisis, inflation in the UK and abroad is causing the prices of energy, employee wages, bills, and raw materials to skyrocket. 

So, how can you increase your consumer prices without affecting your customers’ loyalty? What is the right price point for your products in today’s climate? Finding the right pricing strategy is undoubtedly vital for all businesses – but there is no “one-size-fits-all” formula you can resort to. 

Check out some tips worth considering in this guide by Accounts Navigator or get in touch with a specialised accountant. 

Assess How Costs and Expenses Have Changed

The changes you are about to introduce in your pricing strategy should reflect the economic climate and increased costs you are facing. Over the past 12 months, the Consumer Prices Index (CPI) has increased by 9% – which represented the sharpest inflation increase since 1989.

At the same time, it is important to look at what is the real effect of this inflation increase on your business. So, before changing the price tag on your products, make sure to have a comprehensive overview of how costs have changed over the past months. 

Align Your Price Point To Your Competitors and Industry Standards

Understanding the extra costs involved with your business (i.e.: increased wages, higher energy bills, and raw materials scarcity) can help you balance your profit margin while also leaving your customers’ loyalty unaffected. 

However, no business is an island, and it is also important to look at what competitors are doing and align with your industry’s standards.

This is important to manage your customer’s expectations and avoid losing loyal shoppers to businesses that are undercutting competitors. 

Target The Right Customers – and Manage Their Expectations

Inflation is not only affecting you – but it also has an effect on your customers’ finances. This means that most of the people in your target audience will have less disposable income to deal with, and they will be highly sensitive to the new price increase. 

However, this isn’t the case for all of your customers. Some tips to roll out a successful pricing strategy that reflects today’s economy include:

  • Identify the customer segment that is the least sensitive to the price increase
  • Opt to target corporate customers
  • Consider leaving loyal, old, and returning customers unaffected
  • Add extra value to the product
  • Communicate with your customers and be clear about the reasons for the price increase

Today’s economic changes are affecting both you and your customers. However, by being honest and building a personal relationship with your audience you can highlight other valuable aspects of your business, such as your unique selling point, customer service, or customisation level. 

Partnering With Accounts Navigator

Unfortunately, a certain pricing strategy will not work as successfully for two different businesses. If you are not sure how to identify the right price point that allows you to maintain your profit margin while also securing the loyalty of your audience, partnering with a specialised accountant at Accounts Navigator can help. 

Get in touch today to book your initial consultation and learn how to deal with the challenges of today’s economic landscape.

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Knowing how to take control of your business finances to maximise profits can be difficult, especially with the current climate. Knowing the common mistakes to avoid can be difficult and can leave you feeling unsure.

Our Director Andrea L Richards has written her E-Book on the most common mistakes made by businesses and has provided expert advice on how to overcome them. 

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