Coping with Inflation: How to Set Your Product's Price

Over the past few years, many companies have dealt with spiraling oil prices and economic swings somewhat successfully by improving their supply-chain management and implementing various other strategies. Over time costs always go up, but it is how your company responds to inflation that decides its fate in the corporate struggle. The manufacturing manager must work to mitigate inflation's impact to some extent without hurting customers or employees and eventually recover profit margins through timely price hikes and increased product quality.

The manufacturing world is facing a dilemma regarding whether to raise the costs of products as the world has plunged itself into a chaotic state of booming expenditures and skyrocketing prices. It is now up to the resilience of manufacturing managers and heads of manufacturing companies to handle the situation effectively. Here are some steps that can be taken to regulate the manufacturing operations of a company, especially a commodity provider, smoothly and effectively:

Before raising product prices due to sudden price hikes for oil and other resources, it is very important to understand the interests of customers and employees. Successful entrepreneurs and managers have contrarian streaks. When prices are escalating, most company managers will decide to increase the prices of their products, thereby incurring the risk of losing prospective customers. However, it is advisable to wait and watch and regularly increase prices on a nominal basis, but not now. Focus on building a customer base that will remain loyal even if you increase prices later.
Consider your prospective buyers’ product-usage behavior and price sensitivity when determining how to alter operations. If the price range of a product has increased by about 3%, then raise your product’s price to a level that’s marginally close to but less than the average. Assess the changes going on in the market and then act accordingly. Try to understand buyers’ needs and then formulate new ways to reduce their grievances by making necessary changes to products.
Devise new ways to manufacture products and packaging through reengineering to counter increasing demand. Try to make the price increases for products as palatable as you can for middlemen and retailers with alternative steps to reduce production and operations costs.
Only slash or increase prices when it’s absolutely necessary, or make a major shift by increasing prices and offering new, improved features with several benefits for customers. Also target cost-conscious customers by reducing the prices for products you are planning to revamp totally. Manage your stock on a daily basis. Unbundle products so that picky retailers can choose according to prices. Don’t give away your products to those who don’t need the discount. Cut prices on items that are inflation-busters, which will help you focus on cash-poor consumers.
Persuade customers to cut down on their expenses by rejecting other products in favor of yours. As a manufacturing manager, create ads and promotions that publicize useful products for slashed prices. Come up with several offers from time to time to increase sales. Concentrate on building profits once you manage to garner a substantial retail and customer base to start with. Try to increase the customer satisfaction ratio in your sales. Welcome continuous feedback from customers and retailers alike.
Lastly, try to appease and support your employees with occasional surprises and treats. Acknowledge their efforts on a regular basis, and don’t try to put off their performance evaluations unless the situation has gotten out of hand. Ideal manufacturing managers always try to give due credit to all responsible for the growth of the company.

Long-term plans to improve other sectors like agriculture and transportation and decrease the costs associated with them also help companies as well as consumers to face price hikes. The key here for the head of a manufacturing company is to devise new ways to educate the consumer and make up for inflation-motivated price hikes. Courting customers with promotions and emphasizing product benefits can only help your company.

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Coping with Inflation: How to Set Your Product's Price