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Marketing Around Inflation
5/12/2011 8:14:09 AM
I remember passing by a gas station about ten years ago and taking a look at the price of a gallon of regular. It had just risen to $1.79 that particular day. "I will never pay $1.79 for a gallon of gasoline!” I remember stating to myself. Boy, was I right about that one. I certainly have not paid anywhere close to $1.79 for a gallon of gas since then. Although I was adamant that $1.79 was just too high, that price was just a blip on the chart as gas prices climbed ever higher. I would like to recant my statement and say that I would gladly pay $1.79 today, along with everyone else operating a vehicle.

What has changed my mind is inflation. A gallon of gas has inflated in price today to nearly 230% of the cost it was ten years ago. Like so many commodities tied to energy, the price of fuel impacts the cost of so many other products which are dependent on gas to run the machinery that is involved in producing the products as well as transporting them to market. For the past couple of years, economists have warned that inflation was the next storm over the economic hill. They point to inflated prices of not only fossil fuels, but also food (a combination of corn prices going up to meet the demand of ethanol production and the rising cost of fuel to farm and transport food to market.) Couple that with the fact that the federal government has devalued the U.S. dollar by printing more money that is backed by nothing more than the good faith of the federal government, and you have the makings of an inflationary period that most of us have not experienced during our business careers.

If inflation is inevitable, your prices will have to go up to reflect your rising costs of doing business. How do you market in times when your prices are going up? Here are a few ideas that you should incorporate into your marketing plans.

1. Market to your functionality, not luxury.

Understand the times that we are living in. This is not the opulent 90’s where everyone had a job. It is 2011 and it is time to get down to earth with your target market. They don’t have a lot of excess dollars to spend on fluff. Jack Trout has written more practical marketing books than will fit on a library shelf. He comments in an interview that in inflationary times, emphasizing the practical aspects of your product is key to marketing well. "In this kind of environment, advertisers have to shift to a more practical message. For example, in the US, Ford Motor Co. is introducing a new generation of an F-150 truck which, historically, is a very big seller. In an environment of high energy prices and a bad economy, what should it do? My advice would be to admit the difficult times but use this to show how the truck can increase the productivity of a contractor.”*

2. Don’t dilute your brand.

In 1849, gold was discovered in California. Tens of thousands of people flocked west to find their fortune. For most prospectors, the California gold rush was a bust, but not for all. In 1853, a German merchant who had moved to San Francisco began selling pants to the miners. The pants were made of a sturdy cotton that held up well in rough conditions. They were simply called "Levis” for the merchant, Levi Strauss. Levi Strauss branded his product and found the real gold was in denim blue jeans.

There is always a temptation in hard times for companies to extend their line of product offerings. This can work to dilute your brand. In inflationary times, it is important that you create brand recognition that stands for something in the mind of your target market, not an extended line of products that really have nothing to do one with the other. I suppose Strauss could have made tents out of blue denim, saddle blankets out of the cotton blend, blue jean upholstered furniture, and called them all "Levis.” He made sure that his brand stuck in the mind of his market as a blue pair of pants that were both comfortable and durable… and made a fortune doing it in a tough economy.

3. Creativity in reaching the end consumer

In inflationary periods, consumers get a lot more picky about where they spend their dollars. Inflation devalues the dollar. It will not stretch as far as it once did. Your marketing should focus on the benefits of the product or service that we spoke of in the first point. But it should also capture the attention of the end consumer. This is where taking a creative message directly to the end consumer can pay huge dividends. Do you remember the Wendy’s Hamburger TV ads that ran in the mid 80’s? Three white-haired ladies examined the contents of a sandwich only to find a very small hamburger hidden under a very large bun. That is when Clara Peller blurted out the immortal line, "Where’s the beef?” (Take a look on YouTube, click here.) That Wendy’s commercial is often cited as the most effective TV advertisement of all time. It simply touted the fact that the Wendy’s single (then their smallest burger) had more beef than the largest burgers offered by McDonalds and Burger King. The more-for-your-money gimmick did wonders for Wendy’s sales, which rose 31% in the wake of the "Where’s the beef” campaign.

4. Reward loyalty

It is really important to hold on to your current clients during inflationary times. It is hard enough to get a first sale and to cultivate a relationship with a client in good times. Your customers are going to shop you during an inflationary period. They have to justify spending money with you as opposed to your competition. You have to find a way to reward loyalty. Retention marketing should be at the forefront of your marketing efforts. Give your customer a reason to come back to you and no reason to leave. That should include an examination of what your clients think of your customer service, your quality (products or services), the ease of doing business with your company, etc. Knock down any barriers that exist between you and them. Two of the biggest things you can give your clients are savings of dollars and savings of time. If there are price breaks that you can give them by buying at a specific time, make this known to them and make it part of your marketing message. If you have a way for them to recoup time, like delivering the product to them instead of having them come to you, do so. Seal up any cracks in the relationships that exist between you and them. Inflation makes dollars scarce. Don’t let little things become the reason your customer leaves you.

____________________________________________

*How will inflation hit brand value? July 8, 2008 Livemint.com http://www.livemint.com/2008/07/08224159/How-will-inflation-hit-brand-v.html

Inflation Is Here by Greg Hunter January 17, 2011 USAwatchdog.com

Levi Strauss The History of Blue Jeans by Mary Bellis About.com http://inventors.about.com/od/sstartinventors/a/Levi_Strauss.htm

 Clara Peller, the Actress In 'Where's the Beef?' TV Ad, Obituaries NY Times, August 12, 1987 http://www.nytimes.com/1987/08/12/obituaries/clara-peller-the-actress-in-where-s-the-beef-tv-ad.html

 

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