Inflation and Your Business (Challenges and Opportunities)

Inflation challenges and your business

Price inflation is now being felt by businesses and consumers. If left unchecked, this inflation will threaten your business’ profit margins and revenue growth.

Behavioral Economic Drivers Behind Inflation

Classic economics defines inflation through supply and demand. Supply has been curtailed due to the Covid crisis. Trillion-dollar federal deficits and practically zero interest rates are spiking consumer demand. The result is that suppliers are using price increases to allocate their limited production capabilities to buyers able to pay the higher price. From the Federal Reserve’s perspective, inflation will work its way out of our economy in a few months as suppliers succeed in returning their productions to pre-Covid levels. Supply will satisfy demand and prices will fall back to pre-Covid levels.

Behavioral economics adds an additional analysis to this classic economic inflation assessment. In this analysis, inflation is a result of societal and economic frictions and distortions tied to the Covid crisis and our country’s ongoing cultural divide. For example, behavioral economics attributes women exiting the workforce as a major factor driving inflation. Fewer female workers limits production growth creating the supply and demand imbalance that is driving up prices.

The result is a structural change in how women view employment. A lack of adequate childcare has driven them out of the job market. At the same time, the #metoo movement has raised awareness of issues surrounding workplace safety and respect. Double that raised expectation for women of color. The result is a structural change in production. And if left unchecked, this structural change will also limit women as consumers. Until women feel enabled to rejoin the workforce, our economy and your business will see higher prices.

Inflation Business Best Practices

Inflation, and its underlying behavioral economics, will redefine business best practices. Today’s most obvious impact is work associate recruiting. The knee jerk reaction involves businesses raising wages to recruit workers. But research shows that wages “satisfy” but do not motivate. To win the recruiting challenge a business must offer both a “satisfying” wage plus motivators like a work associate career path or, for millennials, building sustainability into their jobs. That is why there are growing examples of companies offering work associates a free college education as part of their recruitment and retention efforts.

Yet to emerge, but coming soon, will be pricing innovations that win customers in an inflationary economy. During inflation, the key market segmentation criteria is how a consumer’s income is changing in relationship to the pace of price increases. Consumers with incomes that are rising faster than inflation are now the high margin sales opportunity. Consumers with income slowing or falling in relation to price increases will require targeted marketing solutions if they are to be retained as customers.

The cultural war over immigration is also inflationary. It is currently impacting labor supplies in construction, food processing and hospitality. It holds the potential of impacting technology companies as the supply of highly educated immigrants is constrained by limiting visas and citizenship paths.

Childcare must be part of the business solution to inflation. Business has a role in breaking the “negative re-enforcing loop” where the more women stay out of the work force to care for their children the more all women face growing pressure to focus on childcare. This is a structural problem as evidenced by job reports showing that the overwhelming majority of new jobs are being filled by males, not females. A business and government collaboration is needed to break this negative re-enforcing loop by creating more childcare at work, through school re-openings and the jump starting of the small business childcare industry.

Today’s Inflation Opportunity

Inflation will drive customers and work associates toward innovating companies that deliver on competitive prices and values. Here are a few companies that started up during the inflationary 1970s: Southwest Airlines, FedEx, Microsoft, Genentech and Apple. All of these companies have in common the deployment of new business models and disruptive technologies that succeeded in winning customers on both price and values. Today, they are market share leaders and are recognized for their workplace cultures. That is your business challenge…and opportunity…in today’s emerging inflationary economy!

Related content:

Fasten Your Seatbelts, Post-COVID Turbulence Ahead

New Virtual Discussion Series Talks Small Business Solutions [Video]

The Process of Review is Critical to Success


4 Definitive Examples to Understand and Serve Your Customers

4 Definitive Examples to Understand and Serve Your Customers

These four company case studies have yielded success across industries Running on Innovation, A New Solution for City Dwellers, Focus on Customers. Learn from these companies that are doing it right. Recently, I attended a public forum called Healthcare in the 21st...

4 Components of Small Business Agility in a Diverse Market

4 Components of Small Business Agility in a Diverse Market

Small business leaders need to understand diversity in order to be connected and create opportunities for success   The model of how to effectively navigate business leadership is changing. For decades stability and homogeneity were hallmarks of business across...

Top 7 Ways to Show Your Customers You Care

Top 7 Ways to Show Your Customers You Care

Even a small gesture can go a long way with a client and will be appreciated.   Nowadays, having a good product or service isn’t enough. Relationships are the differentiator. Today many companies are making investments in customer advocacy and loyalty programs...

Video Gallery

Modern version of Stoic philosopher Epictetus
A professional leads a cybersecurity training session for employees, emphasizing best practices. The photography captures the engagement of participants, showcasing the educational aspect of safeguard
Hispanic bearded male businessman trainer teaching coaching new recruitment African American female businesswoman employee in formal suit sitting studying learning company graph chart strategy
The presence of a robot using a computer. Office keyboard being typed on by machine. future IT group,.
Latino Streetwear Entrepreneur Latin Biz Today
Chef Lorena Garcia cooking with a wok
Latina Chef Loren Garcia
Latin Biz Today partner Johanna at the San Sebastián Festival


Which item currently represents the greatest hurdle in the growth of your business?(Required)

Sign Up for the Latin Biz Today Newsletter

PR Newswire

Featured Authors

Innovation & Strategy


Four Basic Principles for Raising Capital

Four Basic Principles for Raising Capital

Outside investors want to understand a business' strategy as well as its financial statements.   The need to raise capital from outside investors requires a great deal of preparation across multiple dimensions. Among many things, investors look to understand...









Work & Life


Health & Fitness

Travel & Destinations

Personal Blogs

Pin It on Pinterest