3 Pricing Tips to Intelligently Tackle Cooling Inflation

By Zilliant

Dec 07, 2023

As global inflation finally appears to be cooling, B2B companies that aren’t equipped to make pricing adjustments with speed and precision risk margin and revenue loss. Read this blog post to discover three pricing tips to intelligently tackle cooling inflation and price adjustments as costs fall.

Pricing Must Reflect Real-Time Market Conditions Even as Inflation Cools

“Inflation has come down meaningfully over the past year after peaking in the summer of 2022, and the fresh [U.S. Bureau of Labor Statistics] report showed evidence of continued progress,” states a recent article from the New York Times.

While many are still cautious, there have been signs that inflation is finally cooling. B2B companies must ensure pricing accurately reflects real-time market conditions while rationalizing price decreases with dropping costs. But the biggest challenge is determining just how far to go. Pricing is the most critical lever when it comes to profitability, so here are three pricing tips to intelligently tackle cooling inflation and price adjustments as costs fall.

1. Leverage a Modern Pricing Strategy

A modern price optimization strategy allows you to understand exactly how your customers respond to price. You can determine — with statistical precision — the specific attributes that result in varying degrees of price elasticity at a transactional level. Identifying and understanding these variables is the key to knowing how far is too far when adjusting your prices. Additionally, price management software makes it straightforward to bring in new cost data, adjust price lists, and publish new prices when ready.

Companies that leverage modern price optimization and management strategies have a distinct advantage in times of economic volatility. Yes, the current marketplace is extremely challenging, but with science and technology, you can reduce the negative impacts, minimize the guesswork, and know exactly how far is too far.

2. Parachute Prices Down for a Soft Landing

Inflation made price increases necessary, but customers are unlikely to tolerate another year of unprecedented price hikes. Companies that have taken the “peanut butter spread” approach to price increases will find that strategy less advantageous when it’s time to reduce prices. For example, companies with a broad cost-plus pricing model might find their prices plummeting if costs drop. That’s certainly not the most profitable of strategies, but it may not be avoidable if the go-to tool to update pricing is a spreadsheet.

Rather than dropping prices quickly in one decrease, consider a more nuanced approach in which smaller price decreases are implemented in a more agile and intentional manner. This scenario allows you to retain more margin – and if recession is on the horizon – success means keeping the pricing and margin gains for as long as possible.

3. Be Surgical and Speedy

When dealing with inflation, whether that be rising or falling rates, it’s important to remember that time is of the essence. Companies can’t afford to be fast and wrong or slow and right. Manual tools and spreadsheet-based pricing management approaches that make up the status quo for many B2B organizations have become active impediments to executing effective margin- and revenue-increasing strategies. Companies that utilize modern price optimization and management software have discovered that it is possible to be surgical and speedy, at scale.

Conclusion

Whether inflation continues to cool or heats up again, B2B companies should be prepared with an intelligent and measured response. For those seeking additional insight into dealing with inflation, no matter what part of the curve you’re in, check out our Inflation Toolkit to discover essential content for combating inflation and staying ahead of the competition in today’s turbulent economy. 