Is raising prices in a down economy inappropriate?
One reader thinks so.
I had the good fortune to be interviewed for an extensive article for a local business publication. During the interview the reporter said “One of my readers thinks that it’s inappropriate of you to recommend that businesses raise prices in a down economy.”
What do you think? Am I being inappropriate? Am I adding to the financial problems the unemployed are experiencing? Or am I trying to speed the recovery?
Here’s my take on the current economic conditions. We’ve been in a discount economy for roughly three decades. Consumers have been trained to expect low prices or free for most of their wants and needs. This discount economy has wrung most of the profits out of the system for large companies and small. Without profits companies don’t have the financial wherewithal to hire more employees. The longer it takes for these companies to generate profits and cash reserves, the longer the unemployment will continue.
It’s counter-intuitive, but higher prices help companies ascertain who really values their offerings and who doesn’t. It helps them restructure their businesses to meet the desires of this narrower customer base and get fair compensation for providing the value their customers desire. The profits they generate can then be used to invest in new, exciting ways to serve their customers – ways that the customers value – or in geographic expansion.
Either activity, new offerings or geographic expansion, will require additional employees. The majority of the investment in either activity will be in people. The more quickly companies can work their way through this process:
- Getting higher prices and profits for their offerings.
- Restructuring their businesses to serve their value-minded buyers.
- Building cash reserves from profits.
- Funding new product/service launches/geographic expansion.
The more quickly we’ll see employment return.
Break the bonds of industry pricing! Call Dale at 314-707-3771.