In mid-March, the European Central Bank raised its inflation forecasts to +5.1% for the year 2022 (Reuters), and this is expected to be sustained. The organization now also anticipates inflation of +2.1% for 2023 and +1.9% for 2024, compared to an initially projected standard of +1.8%. All this is coupled with growth forecasts slightly revised downward. In reality, this is likely just a phase in the face of the uncertainty of the coming months.

Following the disruption in supply chains due to the Covid pandemic, which led to shortages of resources and raw materials, resulting in price increases; energy prices, already initially on the rise, will be seriously and sustainably impacted by the Russian-Ukrainian conflict. In other words, from food to high-tech industries, very few industrial or service sectors, whether B2B or B2C, will be spared from necessary price increases for the months, probably years, ahead.

Cost or Differentiation?

Production or service costs are going to rise, and unless you're willing to lose money by completely giving up your value capture, this will inevitably have a lasting impact on the prices you charge your customers. If you had a cost-dominance strategy, it's not looking promising to maintain it as is; but a crisis remains an opportunity to gain some market share if you can control your costs nonetheless.

If you have been pursuing a differentiation strategy, you'll need to go even further to justify the price difference, which due to leverage effects, is likely to be even more significant for your products and services. It is evidently challenging to completely rethink your strategy or processes to shift from a differentiation strategy to a cost strategy in a very short time. You risk finding yourself in the "limbo" of your market, "neither the cheapest nor the best"… In other words, a perilous position for your sales.

To bridge the gap between the price you will need to charge and the price your customers will be willing to pay for your products and services, you will need to quickly increase the "perceived value" by your customers. The risk for you, indeed, in a tightening situation, is to lose market share to competitors who succeed in positioning themselves more competitively on pricing. In short, it seems like you don't really have a choice.

Rapidly Enhance Perceived Value by Improving Your Marketing.

There are many tangible or intangible levers you can pull to increase the perceived value of your offer in the eyes of your customers. Here are a few that will allow you to do so more or less quickly.

Functional Qualities

It might not be the most obvious, but if you can rapidly add functionalities without costs skyrocketing, now is certainly the time to do it. If the additional costs are minor, you could slightly increase product quantities to exceed the standards set by the competition.

Complements

You can add accessories for product use that were once supplied or sold separately. Create attractive bundles compared to the competition. For services, you might consider extending an initial warranty period or offering free delivery.

Peripheral Services

It can’t be emphasized enough, digital is a fantastic playground to enrich your value proposition for prospects and customers. Rapid implementations could include enhanced online customer service, advisory content, entertaining content, complementary products or services to order online, loyalty programs, etc. This is likely where the most significant and rapid impact can be achieved.

The Brand

The brand remains a crucial reference point in consumers' and clients' choices, whether it's B2C or B2B, even during inflation. Hence, it's time to enhance your brand visibility both organically and through paid channels. Given that growth might not be as strong as anticipated, you might potentially find opportunities in advertising prices, which will be less affected by inflation. But it is also the time to work on your brand image and attractiveness for your prospects and customers.

Values and Commitments

A brand's social or environmental engagement strategy is not improvised. But if you have one and have been shy to express it, now is the time to shout it from the rooftops. A part of your audience, particularly those oriented towards differentiation, will continue to be sensitive to it and attribute value to it. Don’t forget that the origin of a product, like Made In France, for example, remains an increasingly important criterion to justify your value.

Employer Brand, the "Employee Value Proposition" Also Involved.

Just like your products or services, your employee value proposition (EVP) will also be impacted by this inflation. Especially among the more junior profiles, and even more so when they are qualified. Unemployment had already begun its decline in the last quarter of 2021 for this population; but in an already strained market (aging population, quest for meaning...) these are profiles commonly less paid and therefore more vulnerable to inflation. They are likely to seek to quickly maximize their income to maintain or increase their purchasing power and will not hesitate to move if an attractive competing offer arises. Moreover, most companies ready to poach them will likely rely on offsetting the bulk salary increases of younger workers against the effects of price increases. So, you also need to enhance your "employer marketing" just like for your products or services if you don't want to suffer on this front and fall into purely transactional relationships.

Whether it's your products and services or your employer brand, every crisis or situation is, more than ever, an opportunity to accelerate positive value creation changes that can remain sustainable beyond the crises.