Therefore, being customer-centric becomes even more important in times of high inflation, and companies must adopt new strategies to navigate this situation:
Inflation forces companies to cut costs
In theory, with inflation, a company’s costs increase, but in reality the vast majority are passed on to customers. Although not all businesses enjoy this possibility. Some companies have clients with fixed contracts in the medium or long term. In other cases, the increase in the price of inputs cannot be fully transferred to the final product.
The ability to increase prices will depend on the results and the rigidity of contracts or demand
Most companies evaluate increasing their prices in the face of inflation. While some have price adjustments automatically integrated into their contracts, others apply it internally at the time of contract renewal.
Either way, a vendor’s ability to raise prices is largely tied to the results delivered to their customer and the permanence of the product. If a client perceives that a provider delivers solid results, it is easier for them to withstand a rate increase. Similarly, if a supplier is linked to business processes, customers will more easily accept price changes.
Inflation will put pressure on profitability
In inflationary times, stock markets place special importance on the profitability of companies; In other words, the markets reward those companies with effective customer retention strategies and solid foundations for lasting growth.
Debt today could depend on customer retention
It is common practice that most medium or large companies are leveraged with financing. That credit depends on your renewal base. If your renewal rate begins to drop, questions begin to arise about the existing loan, as well as your ability to refinance.