Episode #1052: Review the current state of inflation, previous responses to inflation, and recent data and research on inflation as discussed on Episode #1052 of the Arete Coach Podcast. Also included are 23 strategies for cutting costs and keeping customers in the midst of inflationary periods for business leaders, CEOs, and executive coaches to consider when managing their businesses.
About Severin Sorensen
Severin Sorensen is a serial entrepreneur and lifetime learner with a passionate curiosity for people and businesses. Severin is the CEO of ePraxis LLC, a premier level retained search firm that provides executive headhunting, talent selection, and executive coaching. In addition to finding top talent, Severin has provided over 7,500+ hours of paid executive coaching to entrepreneurs, CEOs, Presidents, and C-level executives. Severin is an ICF ACSTH Certified Executive Coach, Certified Organizational Development Coach, Certified Life Coach, and Certified Positive Intelligence® Coach. Severin is the founder/producer of a new podcast, Arete Coach, that explores the art and science of executive coaching with some of the industry's best coaches.
From 2010-2018 Severin was also a Vistage Chair where he coached three CEO and key executive groups. In 2011, Severin received the "Rookie of the Year Chair Award" from Vistage. Since 2013, Severin has added international speaking for Vistage, CEO conferences, executive peer groups, and corporations on the topic of identifying and hiring difference-making top talent.
After graduate school, Severin moved to Washington, DC, where he worked on security-related economic and public policy issues that included a brief stint in The White House, as a Special Assistant to the President, for George H. Bush (POTUS 41). In 1994, Severin founded Sparta Consulting Corp., and Sparta provided world-class physical security and safety related management consulting services for public and private sector entities. From 1994-2002, Severin managed HUD's Crime Prevention Through Environmental Design technical assistance and training program. In 2005, Severin sold Sparta to Westec Interactive (Digital Witness), which was subsequently acquired by Interface Security.
Severin, a native Californian, grew up in Salt Lake City, UT and graduated with honors from the University of Utah with Economics and Political Science degrees. He completed graduate studies in economics at King's College, Cambridge University (England), where he earned a M.Phil. degree in Economics. Severin has a great love and appreciation for sports, and while overseas, Severin rowed for the King's College Boat Club, and played basketball for the Cambridge University Basketball Team (1986-87).
Jamey Johnson’s “In Color”
To kick off the episode, Severin quotes the song “In Color” sung by Jamey Johnson. The song tells the story of an older man shuffling through black and white photos saying, “You should have seen it in color.” Severin relates this song to the importance of looking back at past seasons of inflation. He explains that “many living today have no context for [inflation]… what it can do to economies, businesses, families, individuals… and their savings.” The USA has not experienced inflation rates like those we are experiencing now since 1982.
Contributors to inflation
Severin reviews contributors to inflation which include increases in material costs, increases in labor costs, changes in productivity, taxes, exchange rates, interest rates, and the economy of neighboring countries.
State of inflation
Measured in November 2021, inflation has increased by 6.9% YoY. The price of many goods have increased faster than household incomes. For example, there is a 59% increase on fuel and oil prices, a 50% increase in motor fuel prices, a 20% increase in the price of beef, and 39% increase in the price of car and truck rentals. Many industries, products, and services have increased their prices faster than the rate of income increases.
Federal influence on inflation
The Federal Government can employ a variety of strategies in attempt to control inflation. Severin shares that executives and business leaders need to be aware of the changes that the Federal Government could make as a result of inflation and that “betting against the Fed is perilous.” The Federal Government has intervened during times of previous inflation, and employers should be aware of potential interventions.
Looking back on previous times of inflation
Severin states that in “times like these, I think there is value in looking back at what others have said about inflation.” Severin shares insights given by Warren Buffett in 1977 and 2015 on the topic of inflation. Based on Buffett’s statements, Severin states that “the best business to own is one that does not require continuous reinvestment… businesses need to preserve capital and make their businesses more profitable.”
Harvard Business Review’s “6 Strategies to Help Your Company Weather Inflation”
Severin reviews key insights, strategies, and takeaways covered in Harvard Business Review’s “6 Strategies to Help Your Company Weather Inflation.” Writers of the Harvard Business Review article state that “companies will need to make moves that not only cut costs, but also build more scalable growth platforms… and stronger purchasing and pricing capabilities.” They also suggest 6 strategies that businesses can use to help them prepare for inflation.
23 ways companies can increase prices without losing customers
Severin shares 23 ways that companies today can increase prices without losing customers, a key strategy for withstanding inflation. The strategies he proposes include the following.
Add value and value price
Add value and increase your cost-basis prices
Increase pricing on remaining units when costs are covered
Incrementally increase utility demand pricing
Geographically increase pricing
Offer premium prices if you are providing a premium product/service
Cost plus fee pricing
Cost plus fee plus COLA pricing
Add a COLA clause to contracts
Reduce unit count
Keep legacy customers at present levels and increase prices on new customers
Increase prices on change orders
Increase prices on some but not all units
Create a range of pricing
Use the cover of the herd
Understand the psychology of pricing
Identify customers that are costing the most
Peg your contracts with foreign currency
Strategically discount for volume purchases
For more information about these strategies, Severin recommends reviewing the article 23 Strategies and Methods to Increase Pricing Without Necessarily Losing Your Customers on AreteCoach.io.
Download the transcript
Click here to listen to the podcast, or click below to view the podcast outline and transcript:
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