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Price hikes might not raise any eyebrows—or tighten any belts, really—when the economy is healthy, or when stimulus checks are arriving with some certainty. But neither of those descriptions reflect the current environment. There are no more stimulus checks to look forward to, and inflation is both extreme and all over the news.

In turn, a report published in January 2022 by Yelp noted that consumers’ concerns about inflation have reached a record high, on top of all the other stresses people currently face, explaining, “Our data shows a record peak of mentions of rising prices in reviews as businesses face inflation, alongside supply and labor issues. At the same time, growth in people searching for higher cost businesses on Yelp, and renewed interest in travel and event categories could be a positive sign for local economic recovery.”

So what’s a [retailer/marketer] to do in this economy, with inflation and supply chain woes pushing up the costs of doing business, even while customers, as eager as they are to start spending, are extremely sensitive to price changes?

“Shrinkflation” is one answer. That’s when companies reduce the number of potato chips in the bag, or wrap fewer sheets of toilet paper on the roll, while charging the same price. Other ideas are consumer education to provide them with ideas for how to stretch their budgets, personalized promotions, innovative and gamified loyalty programs, building more expansive e-commerce platforms, and investing heavily in customer service.

But even with all these initiatives, the underlying truth still holds: Gas, groceries, clothing, and rent (i.e., the basic necessities of life) are more expensive than they were a year ago, as are entertainment products, jewelry, and other products that make life enjoyable. So the question is not really whether companies can pass along their rising costs to consumers; they already are. The question becomes, How much can and will consumers bear?

Discussion Questions:

  1. What can companies do to keep customers happy, in a time of inflation?
  2. Are you noticing prices going up? What is more expensive now than it was a year ago, or five years ago? Are you surprised by the change in price?
  3. Why are consumers worried about inflation?

SOURCE: Tom Ryan, “Will Retailers Find It Harder To Pass Along Price Increases in the Months Ahead?” RetailWire, February 14, 2022; Teresa Rivas, “Price Increases Are ‘Rampant’ at Retailers. Blame Inflation,” Barron’s, March 14, 2022; “Inflation-Related Reviews Reach Record High in Q4, According to the Yelp Economic Average,” Yelp/BusinessWire, January 26, 2022; Erin Arvedlund, “How Shrinkflation Hurts Us, From More Expensive Toilet Paper to Fewer Doritos in a Bag,” Philadelphia Inquirer, March 15, 2022; Elizabeth Crawford, “As Inflation Surges, Retailers & Manufacturers Need New Strategies to Earn Consumer Loyalty,” FoodNavigator-USA, February 15, 2022; Maria Goncalves and George Nott, “How Supermarket Loyalty Schemes Are Aiming to Trump Inflation,” The Grocer, February 3, 2022; Nahla Davies, “How to Support Your Customers During Times of Heavy Inflation,” Allbusiness.com, March 9, 2022; Kelly Anne Smith, “Here’s What’s More Expensive as Inflation Continues to Rise,” Forbes Advisor, March 10, 2022