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, explains four strategies for maintaining profitability when companies face scenarios of rising prices and low dynamism in economic activity.

Previously, the author published an article in which he explained other techniques that could help companies avoid negative effects on their finances, in a scenario of inflation and economic recession.

Detail of the four recommendations:

-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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