In times of inflation and rising prices, price plays an increasingly important role in purchasing decisions. Consumers everywhere are becoming more concerned about price.
Anyone who has not paid much attention to prices in recent times will be surprised to see the significant increase in prices of products and services. To do their job well, every marketer needs to know how to cope not only with inflation but also with the shocks that hit the consumer psychology.
1. Understand your customers
There are at least four ways that customers can react to rising gas prices:
(i) Drive less and use public transport instead;
(ii) Reduce travel distance, such as traveling closer to home;
(iii) Drive more economically and slowly to reduce fuel consumption
(iv) Buy a fixed amount of petrol instead of filling up the tank like before even though this means they have to visit petrol stations more often.
Some customers may even be more interested in fuel-efficient hybrids—an illustration of how price storms can create new consumer demand.
From there, we can see that understanding customers, their needs and desires is essential before building and implementing any marketing strategy.
2. Invest in market research
Marketing activities will have to evaluate and rethink current customer segments around purchasing behavior and price sensitivity. Each marketer needs to stand outside the market and talk directly to customers to understand their thoughts and how their attitudes and behaviors are changing in times of high price inflation.
It is then important to quantify these changes and then develop product and pricing strategies that satisfy customers while maintaining market share and profitability.
3. Redefining value
Soft drink customers can think about price in three ways:
(i) The total price per can or bottle,
(ii) Price per large box
(iii) Monthly expenditure.
Cash-strapped customers will focus more on the full price of a can of soda. They will go for the 99-cent can of soda instead of the $1.29 case of soda with 50% more water.
To appeal to these consumers, marketers must shift their marketing strategies to promote smaller product designs and packaging at lower prices. This may mean reducing package sizes, something the soft drink industry has always done to combat inflation.
4. Use promotional forms
In times of inflation, more customers than ever will be looking for price reductions. However, don’t forget about other options for customers who don’t need price reductions. Cutting prices is just one of many options when dealing with inflation.
For cash-strapped customers, marketers should focus on price-related promotions directly on smaller retail units.
As for cash-rich customers, marketers need to encourage them to spend more to avoid future losses when prices may rise further.
5. Convince customers
Companies need to convince customers to cut back on spending on other products/services, not their own. In tough times, customers need and deserve specific advice more than ever.
So if you're Haagen Dazs, tell your customers to give up the no-name, high-fat peanuts, but not stop enjoying the comfort of sitting on the sofa and watching TV with a cool ice cream.
Strong, established brands can maintain customer loyalty while increasing retail prices somewhat. Weaker brands face the risk of being substituted and cut back.
Clearly, not all marketers are equally affected by inflation and price storms. Categories such as gasoline, food and retail – where manufacturers need to add some value before the product reaches the end user – are more vulnerable, while global luxury and unique brands are often safer, regardless of price.
Particularly challenged are marketers of products or services whose input costs are not easily understood by customers, such as decorative candles which are particularly sensitive to rising oil prices.
The key in every case is to provide customers with full information, apologize for the uncontrollable increase, offer some promotional options for price-sensitive customers, and re-emphasize the benefits of the product/service.
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