(This article originally appeared in Forbes)
There’s no need to tell you that prices are up and inflation is high. You read the news. You also know that the current inflationary environment will likely last throughout most of 2022…maybe even beyond that.
The key question you have is: what do I do about this?
Your concern is navigating your business through this period of higher prices. I see lots of my clients doing the things that you would expect like trying to lock in long term contracts, buying inventory in bulk and cutting costs. And of course, they’re all raising prices. But are they doing intelligently? Sadly, many of them are not — and they’re taking the risk of losing business because of it.
That where your customer relationship management system comes in. Because the biggest difference between running a business during this inflationary period and our last one in the early 1980’s is data. We have lots more data than the generation before us. That data is in our enterprise resource planning (ERP), accounting and our CRM systems. And the smartest companies I know are leveraging new CRM tools so that, instead of upsetting their customers with blanket price increases made in the dark, they’re targeting these increases based on customer profitability, margins, and product lines.
An example of one of these tools is offered by White Cup. Based in Seattle, the company recently released a CRM application that sits on top if its core products which integrate with most of the major ERP and accounting systems to extract pricing, customer and product data in a way that gives a manager the ability to determine the best pricing possible for each.
White Cup is targeted at the distribution industry, where even small adjustments to a price can result in significant margin increases. But they’re not the only game in town. Business intelligence tools offered by Microsoft, Sage and many other mainstream and industry-specific ERP and CRM vendors can also help their customers better analyze their pricing and margins so that they can more efficiently target price increases to certain customers…and avoid upsetting others.
But better pricing is the first of two steps for using your CRM system to fight inflation. The second is communication.
Assuming your CRM system is integrated with your ERP and business intelligence (BI) tools, and you’ve determined which customers and which product lines will be affected by a price increase and how much those increases will specifically be then the hard job begins: telling your customers.
That means emailing, texting, calling. It means giving your customers advance notice of when price increases will occur. It means updating them on lead times and product availability. It means capturing and analyzing their responses and perhaps adjusting your plans if it means the loss of revenue. But if done the right way and the with the right data, you probably won’t lose revenue.
Using your CRM system the right way means helping your customers know what’s coming so they can adjust their own plans. They know prices are going up. They read the same news you read. They’re raising prices for their customers. They — like you — just hate surprises. As Tom Hagen said in The Godfather about his boss: “Mr. Corleone is a man who insists on hearing bad news immediately.” Knowing the facts helps you make a plan (and hopefully that plan doesn’t include leaving a horse’s head in your competitor’s bed).
There’s no silver bullet for fighting inflation. My best clients are doing multiple things to navigate their companies through this time of higher prices. Many of them are leaning heavily on their CRM and BI systems to do this. They’re using the data their parents never had back in the early ‘80’s. They’re targeting their price increases and using revenue optimization tools like White Cup to focus on those product lines that are most profitable. And then they’re turning to their CRM systems to manage their relationships when the bad news is delivered.
This is what smart managers are doing in 2022 to fight inflation. Ultimately, this challenge will pass. And I know for certain that they’ll still be in business long enough to tell their grandchildren what they should be doing the next time inflation comes back again.