Prices: Profitable Sales During Inflation and Recession
Avoiding hurried discounts, managing price increases according to costs and improving cash flow are some of the strategies that companies can resort to protect their profitability in contexts of inflation and recession.
Friday, September 6, 2019
Ariel Baños, a price management specialist and founder of Fijciondeprecios.com, explains four strategies for maintaining profitability when companies face scenarios of rising prices and low dynamism in economic activity.
-Say "no" to hasty actions in the face of falling sales: In these cases, the quickest solution seems to be discounting. But in reality, lowering prices in a falling market can be a double-edged sword. Even if an increase in sales volumes is achieved, it will not always be enough to offset the impact on profitability.
-Control costs and update prices regularly: Work with your teams and even industry colleagues to make sure you keep your suppliers' information up to date. Manage price increases according to costs, in a timely manner. Avoid "delaying" increases and surprise with a sudden adjustment to customers.
-Design special offers for vulnerable segments: Identify those customer segments most affected by the price increase and, in these cases, carry out special promotions or economic packages that allow them access, even in difficult times, to your products or services. Promotions for retired people, unemployed people, large families or companies from the most affected sectors are measures to be considered.
-Use price management to strengthen cash flow: The crisis causes an increase in the cost of financing sources and also resents the payment chain. Improving cash flow then becomes a priority objective for every company. Thus, giving greater weight to financial discounts, or even term payment, encourages customers to improve their financial behavior, choosing cash payment or shorter term than usual.
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Making real sales projections, segmenting prices and designing savings options are some of the strategies that companies can use to protect their profitability in contexts of inflation and recession.
Ariel Baños, price management specialist and founder of Fijciondeprecios.com, details techniques that could help companies avoid negative effects on their finances, when faced with scenarios of rising prices and low dynamism in economic activity.
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The last weeks of December are generally a good time to evaluate the results of the strategy implemented throughout the year that is ending, and to reevaluate plans for next year.Ariel Baños, a specialist in price management, recommends that companies commit to five principles in order to get the information needed to decide on plans for next year.
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