Recent Google Trends data shows a huge spike in individuals searches around the term “inflation.” At the same time, many marketers are aware of increases in pricing within their organization as a result of factors such as the packaging, production, transportation and supply of goods.
What should marketers keep in mind as we face the possibility of price increases in our products and competitor’s products? What do marketers need to consider about the psychology of the consumer as prices increase?
1. Have a plan. Make sure you have a plan for any customer concerns that might arise with a price increase, and be particularly sensitive to customers being more sensitive to your prices if in 2020 and early 2021, you offered more discounts and price cutting than usual. Customers generally respond negatively to price increases coming out of economic downturns, so be prepared.
2. Leverage brand equity. Strong brand equity correlates with low price sensitivity. That means that the marketers that have been doing their due diligence in investing in Brand will have an easier time adapting to necessary price increases than their competitors. Many focused on brand building efforts in 2020, and now is the time where those efforts can help at the check-out line.
3. Consider a scarcity strategy. If your price increase is driven by something outside of your control like production issues, supply issues, or scarce labors, then consider a scarcity strategy. A scarcity strategy involves communicating to consumers that our product is scarce to help spur brand salience and brand affinity. As a result, your customers will be more likely to buy your product when the opportunity arises.
Overall, these price changes will be a challenge for marketers in 2021 as they balance the marketing and sales of their products amongst the marketing and sales efforts of their competitors’ products. So if you see price changes in your category, keep in mind that your customer has some understanding of the context in which these changes occur. They understand that container ships can get stuck in the Suez Canal, at least.