Pricing: Navigating Through the Current Norm of Increases
We have already become well versed in communicating changes throughout the supply channel. Rising costs of raw materials, labor, shipping and operations are driving pricing up significantly throughout our economy. Unlike in years past, price increases will be the norm, and the age-old year-end question and assumption of holding pricing for next year is out the window.
Of course, some suppliers have already passed on mid-year price changes to offset cost increases throughout the channel. However, most pricing is certainly going to be adjusted further to capture the attack on margins that we have all experienced in 2021. If you have not already, it is definitely time to prepare your clients for what is to come.
As consumers, your clients are already dealing with inflation and supply issues on the store shelves. Naturally, reminding them of that reality in their daily lives and how those very same factors affect branded products is the easiest way to communicate the current state of affairs. Raw material sources, product factories and supplier/decorator costs are all important to point out.
Now more than ever, it is helpful for your clients to better understand the supply chain and the complexities that you navigate for them. It is where you add value. You not only need to pass on those increases, but you also need to protect your traditional margins to better cover your increases in cost of operations. Consider presenting new alternatives and enhanced value with creative product kitting, personalization and drop shipping. You may be providing them much-needed labor and even saving them distribution costs and headaches.
The reality, of course, is that your client budgets may not allow for significant increases. Budgets are certainly under scrutiny with the economic hit that have affected so many companies. Alternative products, lower level of product quality or features, lower-cost suppliers, or even a new distribution schedule with fewer units or less frequent promotions may be the compromise and answer for 2022 to mitigate some of the pricing increases. While this is certainly not the time for struggling companies to cut back on marketing and generating revenue, value is important to acknowledge and work through to still help achieve their goals.
Proactively informing your clients with confidence, but doing so empathetically, is the most direct approach. It is OK for them to understand some of your pain points in operating your business in the past year as well. I hope that it will facilitate a conversation that gives you more insight into how their business is dealing or not dealing with the challenges. Ideally, you can present a few solutions that help improve their position.
Supplier specials will still be an industry practice. Because of the unknowns, some product pricing is being formulated by hedging and speculating on costs. If suppliers experience some unexpected savings, specials will be a tried-and-true vehicle to stimulate sales and move available stock. Forwarding those supplier specials more regularly to your clients relays a message that you are out there searching for value on their behalf, even if is not the same products that they are used to buying from you.
There may even be some price slashing in mid-2022 as things normalize in the supply channel. Conveying those kind of savings to your clients will be the ultimate good news, and unexpected as no one has grown accustomed to price decreases.
Above all, we all need to make certain we are adding real value and that it is obvious to our customers. Provide new ideas and solutions while helping them track the ROI of the promotion whenever possible. Make sure they know that they have a sourcing expert tied to their product orders and promotions. Communicate some of your wins in finding the solution to their current needs. Demonstrate what you bring to them as a buffer between the factories, suppliers, and their events and giveaways.
Now is the time to tout your successes on their behalf. It is well worth the extra time and effort to point out how hard you have worked for them. Let them know you are connected and on it for them now—and as things get better.
Mark Jenkins, managing director of Pioneer Balloon Co., has been involved in the promotional products industry for more than three decades. He has led the national sales and marketing efforts of three different suppliers. Jenkins is a road warrior, traveling nationally an average of 36 weeks per year, visiting distributors and participating in trade shows, sales meetings and industry events. A former PPAI board member and chair, he has been active in volunteering, bringing his industry knowledge, perspective and leadership to the table. Visit his website here.