Given the quarterly consumer inflation figure of 6.9% released last week, one of the implications is that we should all be raising our prices by 7% as a minimum…just to stand still.
While using the CPI % is a crude instrument to measure changes in our business input costs such as labour, raw material, overheads etc., it can be a useful proxy.
Alternatively there are other price indices such as Producer Price Index or Capital Goods or even Farm Expenses. See graph below from the December quarter (March quarter business indexes numbers not yet available but will no doubt be similar)
In our pricing workshops we go through that a price increase is the simplest and most cost effective use of your scarce time to grow revenue and ultimately your bottom line. Remember: keep the % increase under double digits.
Finally, Clients have asked whether you need to justify your price increase. Our standard response has been that you don’t need a justification however it pays to have a considered response ready if a valued partner or large client does ask why. In the current trading environment this shouldn’t be hard to do.
PS If you are providing your product or service to customers that would find it difficult to absorb an increase then consider segmentation or loyalty discounts or even a staged price increase.