“Management must raise prices, raise them a lot, and raise them frequently.”
Business writer George Stalk writes this eye-catching sentence in a recent blog on Harvard Business. He believes the 12-month run-up we’ve seen in commodity prices (ethanol +47 percent, wheat +40 percent) will continue to rise in the foreseeable future. One reason: The increasing appetite that China has for all types of consumer goods (as well as for oil and steel) will continue to pressure the supply side of supply-demand.
As inflation gathers stem you have to raise the prices you charge because you really have little choice, Stalk says. The longer you wait the worse off you’ll be. His post goes through the price increase rationale for a variety of business models, and also offers some creative ways to spare your customers too much sticker shock.
If that isn’t bad enough news, Stalk has more for you.
The incomes of consumers and the profits of businesses are not increasing at double digit rates. The pie of disposable income is shrinking in this inflationary environment. Consumers and business will adjust and adjust downwards… Some consumer categories will contract.
In other words, as you raise prices fewer of your customers will be able to afford them. It may turn out you need a new business model — or a new business.
What’s your gut tell you about how you will be pricing going forward? Can you afford to pass along your escalating costs to your customers? Can you afford not to? What’s the best way to do so?
(Price tag image by kennylouie, CC 2.o)
