Introduction:

• Inflation affects all businesses, from the cost of materials to shipping and services.
• Even businesses that don’t directly deal with material costs, like insurance agents or bookstores, feel the impact of inflation.

Recognizing the Impact of Inflation:

• Businesses need to monitor and account for inflation rather than reacting to price increases.
• Many businesses only raise prices every couple of years, which can lead to losing margins as costs rise in the interim.

Price Increases and Customer Expectations:

• Customers are used to frequent price increases, whether at the gas station, in real estate, or restaurants.
• Holding prices steady to retain customers may backfire, reducing margin and hindering business growth.

The Risk of Underpricing:

• Offering products too cheaply can negatively impact service quality and employee retention.
• Charging what your service is worth ensures sustainable growth, excellent customer service, and high-quality products.

The Effect on Employee Satisfaction:

• Without raising prices to keep up with costs, businesses can’t offer competitive wages or perks for employees.
• If employees' expenses rise but their salary doesn’t, morale may decline, and you risk losing valuable team members.

Maintaining a Healthy Margin for Growth:

• Retained earnings from healthy margins enable investments in equipment, staff, and business development.
• Cutting margins to maintain low prices can cause long-term financial problems, leaving businesses unable to compete.

The Value of Perceived Luxury:

• Raising prices can increase the perceived value of a product, shifting it from a commodity to a luxury item.
• Some businesses may fear losing customers by raising prices, but many customers value quality and are willing to pay more for premium services.

Example from Business Experience:

• A service was raised from $80 to $160, and rather than losing customers, the perceived value increased, leading to higher sales volume.
• Adding value along with a price increase can enhance the customer experience, demonstrating that quality is worth the price.

The Dangers of Over-Cutting Prices:

• Over-cutting prices can put businesses in a dangerous position, reducing their ability to reinvest and grow.
• Maintaining a reasonable margin ensures businesses can continue to provide excellent products and services.

Dealing with Customer Complaints vs. Objections:

• A complaint about price is not the same as an objection. Complaints are usually venting, while objections are reasons customers refuse to buy.
• If you keep your margins healthy, customers who can’t afford the price may not be viable long-term customers anyway.

Sustaining a Long-Term Business Model:

• Reducing margins may seem like a quick fix, but it can lead to the eventual failure of a business.
• Focus on retaining healthy margins to ensure business stability, even when external market conditions are tough.

Customer Trust and Business Longevity:

• Customers trust businesses to provide products and services over time, and they want reliable partners.
• If a business loses margin and cuts corners, it may eventually shut down, leaving customers scrambling to find another provider.

Conclusion:

• Maintaining a proper margin is crucial for business survival and success.
• A healthy margin allows for reinvestment in employees, product quality, and customer service.
• Don’t let fear of price increases undermine your business; manage inflation effectively to stay competitive and sustainable.