Is Your Business Imperiled by Cost Increases?

By Rich Bond

You are probably seeing all different kinds of cost increases including the cost of your raw materials and the salaries of new employees. How is that affecting your business? Are you doing anything about it?

If you are considering price increases to offset those costs, read McKinsey’s article on the most effective way to implement your new prices. The consulting firm maintains that the key objective of any good pricing strategy needs to be protection of margins. They share a 4-step plan in their article “Defying cost volatility: A strategic pricing response.”

Before the Covid crisis, I wrote a white paper about the incredible impact pricing can have on your bottom line. A one percent increase in price could increase profit by 12%, while cutting costs by one percent only yielded a 6% bottom line impact.

McKinsey’s latest findings show that the way pricing is implemented will impact how much of that increase flows to the bottom line. Fully, two-thirds of the pricing impact can be lost! I believe the situation could be even worse in small companies.

I would be happy to talk to you about how some of our client companies have been able to make pricing work for them. Reach out to me if you want to discuss pricing other profit drivers at 203-221-3233 or Richard.bond@bondandcompany.com

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