7 ways to keep and satisfy customers if supply chain disruptions mean raising prices

“Redundancy” and “replacements” are clearly means to avoid supply shortages. The reality is, there are only so much of a given item and a limited number of appropriate replacements (think popular electronics, automotive parts and children’s toys, for example) in the face of a supply chain crisis.

If you happen to be a retailer, service provider or product manufacturer, ultimately the price you pay is passed on to customers – whether B-to-B or B-to-C. The current supply chain episode that has consumer goods and manufacturing supplies behind in delivery schedules has many nervous about meeting demands – especially in the lead-up to the holiday shopping season.

The National Retail Federation put it plainly to MSN Business Insider that shortages of the things we want and need are all but “guaranteed.”

“We’ve been warning consumers to manage their expectations for the holiday shopping season for months now, said Jonathan Gold, vice president of supply chain policy at the National Retail Federation. “The fact of the matter is the supply chain is stretched to its limit from end-to-end.”

Too add salt to the wound, the result for customers and consumers can only be reduced selection AND higher prices  – something which retail and manufacturing analysts also all but guarantee.

First, do no harm: Protect Your Brand

Protect your brand as you consider the tough decision to raise prices.  Following are a few suggestions to accomplish just that.

Get suggestions AND opinions from staff

There is great value in getting customer insights from those in the most frequent and detailed contact with your customers.  Staff suggestions and opinions on possible customer reaction to potential changes can be valuable. Still, we find most firms do insufficient market research, so in the absence of – OR  – to supplement it, get the views of those who work with customers every day.

Resist temptation to raises prices at all – add value instead

The option to add-value can recover part of the extra cost of affected items and provide added-value and variety to customers. Both add reasons to patronize your brand. This is one of the first places to look, unless you have a single product (material, size, quantity, availability, etc.), with no reasonable add-ons or extensions.

“Would you like fries with that?” Remember most businesses have this option – don’t be concerned that the example comes from a sector other than yours.  Getting a percentage of customers to buy something they typically don’t changes to profit margin and net revenue earned from that transaction. It can also give your customers a reason to use one of your products that they forgot about or perhaps never considered. Either way, you have reduced the cost consequence of buying one item by adding another to the purchase.

Unbundle in a way that gives the customer options

Most of us know things we took for granted on airlines are now often provided for an extra fee. This can be an effective way to  add value when the item is not viewed as essential from the customers’ point-of-view. Combine this with a broader range of choices, not just a charge for the same thing that was free, and you can recover increased costs, give customers more choice and earn more.  Of course, airlines have a tough time with this approach when it comes to baggage fees, but many options and upgrade potential exists for other services.

Restage the product, NOT the brand

If your product is viewed as a commodity, perception is reality, so the added-value customers perceive is often worth a higher price. This is often accomplished by pointing out a feature that’s already present, but not mentioned by you OR competitors.  This is often merely a slogan – no need to do more than confirm the believability of the new claim.  If it helps your product stand apart  – – when it was just a part before – you may have a winner. Just consider a few campaigns that are sure to resonate with those of us of a certain age.

“Ivory Soap, So Pure It Floats.” Proctor & Gamble wanted to emphasize that Ivory Soap was purer than the average castile soap. Actually, Ivory floats because it’s full of air and less dense than other soaps.

“Mobil, the detergent gas.” – Detergents are liquid solvents made from petroleum and so is gasoline. Only Mobil advertised this even though all major brands of gasoline contain detergent. This could justify a higher price for those interested in engine performance.

Folgers Coffee: “mountain grown” – Because of the physical properties and climate needs of the coffee plant, all coffee is mountain grown.

Resist Temptation to Price Gouge

Some may seize the circumstance of inflationary times to pad their profit margins by raising prices by a much higher rate than their increased costs, and good judgement, suggest.

The long-established formula for price increases is to pass on costs dollar for dollar to customers – depending on the industry. A warning: price resistance by customers may eat some net profit unless margins and dollars earned are greater than the loss of some customers due to the increase.  This is price elasticity – or how much demand will change in either direction in relationship to a price change.

For example, if customer behavior barely moves after a price increase, demand is inelastic. If customer behavior is severely disrupted after a price increase, demand is classified as elastic.

The other factor to consider about customer behavior is willingness to accept an increase or defection in favor of an alternative – or a customer who decides to forego a purchase altogether if the price increase goes too far.

For another example, a homeowner is likely willing to pay more for water and sewer but may decide to skip the family’s favorite brand of potato chips if the price increase is too high. That customer can find a cheaper alternative or decide they can live without potato chips altogether for the time being.

“We Hurt When You Hurt” – Rally Your Customers

Make your stand with your customers and redirect them to the REAL culprit.  The higher price is not your doing; it’s no more profit for you – just extra cost for you and your customers, thanks to factors simply out of your control.

For some businesses, as prices increase (driven by global supply bottlenecks, personnel shortages or otherwise) some buyers fall away, while others may now become more attractive. Consistent and continuous defense of your brand and customers can mitigate the impact of surprises that inevitably occur.

There is no excuse for being in complete disarray when core segments of your business are disrupted. It’s expected that most businesses would have a contingency or “Plan B” in place to deal with disruptions of all kinds.

The good news is in this case is that nothing lasts forever.  More good news: When you have a customer-centered contingency in place, you can at least be prepared to execute your “Plan B” with less disruption to sales and operations.