Pricing in an inflationary downturn

Continuing on our subject of pricing in a downturn and, more specifically, in an inflationary downturn, The McKinsey Quarterly (a great resource for pricing articles and research) released a great article to guide companies through pricing hurdles in this uncertain economy.

"In the current environment, costs are rising as price sensitivity increases. Six tactics can help companies get pricing right."

"Getting pricing right is always a challenge in an economic downturn, as decreasing demand, excess capacity, and greater price sensitivity all conspire to drive down prices. In most downturns, the cost of raw materials, feedstocks, and other upstream supplies—as well as the cost to serve customers (for delivering goods, for example)—tends to stabilize and even decrease as business activity slows. As a result, decreases in downstream prices are at least partially offset by lower upstream costs. But in the current environment, not only is weaker demand from the end user making it harder to maintain prices, but significantly higher and more volatile input costs mean that companies caught in the middle are getting hit from both sides.
What’s a business to do?"

• Watch for sudden shifts in price structure


• Monitor customer-level profitability


• Adjust to changing customer needs


• Update price sensitivity research


• Monitor your industry’s microeconomics


• Study your suppliers

Read the full article: "Pricing in an Inflationary Downturn" The PPS pricing article archives also have great resources, including "Coping with High Inflation" and "Navigating Inflation's Hazards", to name a few.