In case you missed the news—or haven’t visited a grocery store in a long time—prices are going up. Whether you’re looking for a house, a handbag, a used Honda or a ham sandwich, everything is much more expensive. According to this week’s reporting from the Bureau of Labor Statistics’ Consumer Price Index (CPI), prices rose 8.5% in March compared to the same month last year, marking the fastest rise since December 1981. While inflation no doubt creates real challenges for consumers, price increases aren’t always good for businesses, either.
From a business perspective, inflation is one of the most powerful forces around—for good and bad. Expectations of inflation can cause purchases to be pulled forward (e.g., “hey, it will cost more tomorrow”). At the same time, it can cause companies to scrutinize vendors in an effort to make sure their costs don’t rise faster than their revenues.
It’s a well-established fact that customer-centric businesses are built to weather the storm. But with every change in the economic cycle—from boom to bust to stagflation—customer-centricity takes on a new meaning. In “go-go” times, it’s mostly about growing revenue with clients. In downturns, it is about holding onto them.
Here’s why customer-centricity matters even more during times of high inflation.
Inflation Will Force Your Customers To Cut Costs
In theory, with inflation, a company’s costs rise but in reality, they are passed on to customers. But not every business has this luxury. Some companies have clients in long-term, fixed-price contracts. Others have less pricing power than they’d like with their customers. Lastly, for many companies, some input costs (e.g., labor) may be rising significantly faster than they can raise prices.
As such, 100% of CFOs will be scrutinizing discretionary spend in 2022 and asking:
- Do we really need this vendor?
- Is there a cheaper alternative?
- Can’t we do with fewer licenses?
- Can we downgrade our version?
If you haven’t driven strong outcomes and a great experience, chances are you’re in for an unpleasant conversation.
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