Prices on the Rise? How are you Leading your Company through this?

Thanks to supply-chain bottlenecks and a tight labor market, the costs of doing business are going up. For the first time in a long time, many companies are (or should be) thinking about raising their prices. But how much?

Tim Calkins, clinical professor of marketing at Kellogg, offers four tips for managers on thriving in a world where inflation, at least for now, is on the upswing.

1. Realize that some inflation is not a bad thing. “Don’t be a hero” and try to keep your prices static, says Calkins. There’s very little to be gained by not increasing your prices.

2. Move sooner rather than later. Wait too long to increase your prices and you’ll be hit with rising costs without a corresponding increase in your own prices. Also remember that many retailers and distributors have rules requiring advanced notice for any price increases.

3. Think expansively about pricing. Consider the full range of opportunities available. You should be thinking about skipping up to the next price level (to access profit rather than just cost recovery), reinvesting in the brand to attract some premium, and thinking anew about things like rebates and discounts.

4. Watch the competition. What are others in your industry doing—or broadcasting that they will do in the future? “Be hyperaware of what people are saying so that you don’t get caught underpricing or overpricing other brands in your category,” says Calkins.

How strategic do you think you’ve been about pricing? What are the industry considerations in terms of competitor action, contract rollovers, supply-side cost pressure on margins and elasticity of demand? What would the impact be of even a 1% increase in price on your profit and cash flow.