Guest Author: Joanne Smith
The Trump administration is rapidly changing policies – reversing the previous administration’s policies and adding new ones – with the increasing use of executive orders (EO’s). Many of these changes will impact costs and inflation, while others may impact market demand or even global supply chains. Companies that can quickly pivot their pricing strategies have the opportunity to improve their business health, while slower acting companies may face severe profit loss.
Tariffs, tax policies, energy policies, (de)regulations, and spending cuts can affect costs and inflation. Along with foreign policy, they can elicit retaliatory responses from other countries. To quote my favorite economist Robert Fry, “I can’t remember being this uncertain about the inflation outlook. President-elect Trump is offering us a mix of inflationary (tariffs, individual tax cuts) and dis-inflationary (deregulation, spending cuts) policies. Who knows what combination we’re going to end up with?”
To make matters worse, large uncertainty exists in the boldness of the policies, the timing and the duration. For example, how large will the tariffs be, when will they begin and how long will they be in place?
Depending on your asset footprint, your supply chain and those of your competitors, policy changes may present a threat or an opportunity to improve your price, your volume and your profits. If you import your key ingredients, tariffs are a threat. However, if you are sourced locally, and your competitors import their products or their key ingredients, you may have an opportunity to both grow your share and improve your price. If global supply chains are disrupted (think 2021) will you be positioned to manage through it better than your competitors?
While pricing decisions have the largest impact on profitability of any business lever, other functions must also be nimble. Their actions greatly impact your pricing power. As an example, will you have high product or ingredient inventory ahead of tariffs to provide a time buffer to make changes in your prices? Does your procurement team have the ability to modify your sourcing plan to a local supply and if so, has a competitor already tied up this local supply? Do you have the capacity or inventory should a growth opportunity arise?
If you knew a hurricane was predicted to hit your town, would you prepare for the safety of yourself, your family and your assets? Of course. Likewise so should your business. It’s imperative that businesses prepare for multiple scenarios, monitor leading indicators then be ready to act with confidence and speed – negotiating from a position of strength.
There are specific pricing practices – relative to contracts, agreements, and quotes – that you should be taking now to ensure you have the flexibility to respond to new administration policies. Further, you need to be prepared for specific pricing strategies for managing things like tariffs.
To learn more, check out my workshop ‘Pricing Implications and Strategies for Changing Administrations’ offered on-line through the Professional Pricing Society.
About the Author
Joanne Smith, President of Price to Profits Consulting, is the author of The Pricing
and Profit Playbook, The Price Negotiation Playbook and Pricing in a Crisis. She is the
former DuPont Corporate Head of Marketing and Pricing. With more than 20 years of global business, marketing and pricing expertise, she now works with global companies to help them develop world class pricing and profit strategies, transformations, improvements and pricing negotiation skills.
Comments