The Federal Reserve Bank has been attempting to curb inflation by steadily raising interest rates to slow consumer borrowing. Congress just passed the “Inflation Reduction Act” to lower Medicare prescription drug prices, reduce health care bills, and supplement green energy providers. Unfortunately, none of that is likely to help your business. Costs continue to go up for product retailers and service providers.
Thankfully, we live in the 21st century. Technology can give us an edge during challenging economic circumstances. With the right strategy and processes, your business should be able to use data analytics to fight inflation and keep prices at a more reasonable level for your clients and customers.
1. Use customer analytics to estimate and forecast demand
Customer transaction information can provide the data to do a report on demand from recent months. Using that as a baseline, account for increased pricing and estimate demand for the upcoming year. Inflation isn’t going away any time soon, so assume that sales will decline, even over the holidays. Consumers will likely reduce their spending in the coming months if prices keep going up.
The rate of your sales decline will be determined by the availability and popularity of your products. Consumers will pay extra for something they need, especially if they can’t find it elsewhere. Sales analytics should tell you which products fit into that category. Forecasting is an inexact science, so those numbers are critical. Do you have the right technology to track them?
2. Introduce bundling and cross-selling to reduce inventory
Many businesses are bundling their best-selling products with less popular items to get rid of excess inventory. As prices continue to rise, unsold inventory can become a problem. Offering it at a lower price as part of a bundle is better than not selling it at all. The data to tell you which products to do this with can be found by analyzing the browsing and purchasing behavior of your customers.
Browsing behavior should be available through website analytics if you’ve set them up properly. Ecommerce platforms track “conversions” that could be a sale, a visit to a product page, or the adding of products to the shopping cart. These analytics show consumer behavior that can be used to develop cross-selling techniques and better call-to-action buttons on your website.
3. A/B testing can help set new price points
Consumer prices will need to go up as provider costs increase. You’re in the same boat as your competitors, so setting the right price will be key to increasing your profits. If it’s too low, you compress your margins. Prices that are too high will be undercut by your competition. Using A/B testing can help you figure out the pricing your customers will respond to.
The last thing anyone wants to do is get into a price war. Sadly, that’s the reality of doing business in an inflationary environment. Quality still sells, but consumers will settle for less if that’s all they can afford. Retailers of premium products tend to suffer the most during inflation. Thrift shops and dollar stores usually thrive. It’s all about affordability right now and budgets are much slimmer.
4. Cut costs with machine learning and AI applications
Inventory tracking and cost control can be exhausting for a human being. Artificial intelligence (AI) applications can do both without breaking a sweat. The previous ideas on this page were all about adapting to higher consumer pricing––this one is about cutting costs. Using machine learning to track inventory could eliminate unwanted items from your ordering process, in turn reducing costs.
If AI works for inventory, it can be applied to other areas of your business. Every company has waste, whether its subscription creep from unused software or too many paper goods in the storage closet. Using spend management software can eliminate the subscriptions. Inventory control will clean out that closet for you. Look for these and other areas where AI and machine learning can be applied to increase efficiency.
5. Activity tracking for remote employees
Data analytics can be used to manage a remote workforce. Think about the impact that would have on your company and your employees. Going remote can eliminate commutes to work, expensive office leases, and the high price of utilities. Tracking employee activity away from the office is easy. You’ll be able to see the hours they work, the calls they make, and the meetings they schedule.
Many companies have been working remotely since 2020 and their analytics show clear financial and morale advantages from doing it. Their costs are down, employee retention is up, and in many cases productivity is higher. Even manufacturing firms are moving their admin and executive teams offsite. It just makes more sense when we have the technology to do it.
Upgrade your technology to stay ahead
The common denominator with each of the items on this list is data analytics technology. The right tech can track sales to estimate and forecast demand, show you online consumer behavior to set up bundling and cross-selling, monitor A/B testing for new pricing, and eliminate wasteful spending and excess inventory. It can even help you manage a remote workforce. Is your technology up to all those tasks? If not, it might be time for an upgrade before the price goes up.
A business line of credit could be a great way to afford technology upgrades in the short term, so you can set your business up for long-term success.
