How can your Business Survive Inflation?
Majority of African countries are currently facing inflation, there is a hike in the prices of commodities which is affecting people’s living standards and more so their purchasing power. Consumers tend to limit their expenditure or look for alternative ways to sustain their daily needs.
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Businesses are feeling the impact of the inflation, the cost of many goods is raising and the tight labor market is pushing wages up, it is getting more expensive to run businesses, and there is a need to pay higher sums for raw materials and specific items may be short of supply and most customers are not able to buy as many products or services as before.
Companies will need to make moves that not only cut costs but also build more scalable growth platforms, positioning them to strategically reinvest in activities that deliver greater resilience and stronger purchasing and pricing capabilities.
- Rethink your pricing strategies.
Find a way to pass on your increased costs to customers. This means that you increase your prices but some businesses can’t raise their prices or else they’ll lose customers. If you have products that you simply cannot meet a price increase, try diversifying your offerings. You could do this by announcing a new range of products that give you higher margins. Or you could target a new customer segment that’s less sensitive to prices.
However, there’s something you need to look out for when you’re raising prices. Keep a close watch on your competition. If your products are priced higher than theirs, you could lose business. You could even apply a loss leader strategy and decrease the price of one of your star products. This will lead people to your doorstep and, while they’re buying the start product, they’ll also buy other stuff that might be a bit more expensive.
- Assess Expenses
The most effective way to address inflation is to assess your expenses and take a look at cost and operating expenses. You may be able to identify areas where you can make savings and cut costs. Consider all aspects of your operating costs such as sourcing raw materials elsewhere for a better deal, and setting up contact with a fixed rate to protect against increases in the near future. Businesses should identify where investments should be pulled back and cost-saving realized.
- Reposition the Brand.
At any given time most offers are either overpriced or underpriced. Inflation offers businesses an opportunity to correct these misalignment in their product positioning. During inflation, businesses can maintain their position in the market by having a price cut and at the same time, the business can solve this problem by reducing the marketing expenditures and lowering the price at the same time to support a more realistic positioning. Depending on the magnitude of those changes, the moves could even lead to higher profits.
For under-priced products during inflation depending on the uncertainty surrounding inflation, combined with customers’ expectations that they might need to pay more, provides an opportunity to change communication and position a product in a higher price tier.
- Prioritise customer loyalty initiatives.
During a time of extreme inflation, customer loyalty could be your saving grace. As prices increase, your existing customer base will be tempted to look for products that are lower-priced alternatives. Secure your customers now by creating value-added incentives that encourage them to remain with your brand, even when prices increase.
- Consider Shrinkflation.
During inflation consumers are more sensitive to increases in the price of goods, since life gets to be more expensive, consumers stick to products that maintain low prices. For a business maintaining low prices during inflation can lead to loss, however, businesses can maintain the prices and not get a loss when they consider shrinkflation.
Shrinkflation downsizes the packaging and products. This means everyday products shrink in size or quantity while their prices remain the same.
- Strive to maintain your employees.
Working during inflation is the hardest time for any business employee, employee retention must be part of your inflation-survival strategy as a business. If you start losing workers, you will spend more money to advertise open positions, hire new workers, train them, onboard them, and get them up to speed. All the while, your ability to meet customer demand will suffer. Your ability to survive today’s high-inflation environment depends largely on your ability to survey your employees, find out what they want in terms of perks, benefits, and scheduling, keep them happy and keep them showing up.
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Running a business during inflation is not an easy task, it’s when the cost of operation tends to rise, consumers’ expenditure habits shift with the preference for low-priced goods, and businesses opt to stay on their toes to survive. Pricing strategies, assessing expenditure, repositioning a brand, and striving to retain workers and loyal customers could be ways for businesses to survive during inflation.
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