Precision pricing is the key to pricing in today’s inflationary environment and in the mixed-inflation markets we can expect in years to come. It’s highly targeted and enables managers to base prices on each product’s true, current costs and each customer’s true, current profitability.
Precision Pricing When Inflation Is Rising
Today’s inflation is caused by a unique mixture of shock waves stemming from Covid-related surges in consumer demand and supply shortages. These are disrupting the traditional supply-demand matches that underlie stable pricing. As Covid persists and people make alterations to their lifestyles and consumption, demand will continue to be relatively erratic both from time to time and from product to product. At the same time, supply disruptions caused by both near-term Covid shutdowns and longer-term institutional problems like constraints in port capacity and fragmented supply chains are likely to persist for some time, and to recur periodically. Precision pricing — which is highly targeted and enables managers to base prices on each product’s true, current costs and each customer’s true, current profitability — is custom-designed for this unstable environment. The authors offer four ways to implement precision pricing instead of traditional across-the-board price increases.