As businesses face ever-increasing living costs, knowing how to stay competitive and continue to thrive can be challenging. Indeed, the US inflation reached in 2022 a 40-year record high. While there are signs that inflation will balance itself towards the end of 2023, the price increase remains a significant concern for businesses at the start of the year. 

Ultimately, the current level of inflation brings back the global economy to the 1970s, hitting a record increase of over 9%. The situation in Ukraine and Russia also contributes to an oil crisis, increasing gas prices and creating additional challenges for the automotive sector. Every business industry will likely be affected, whether inflation hits energy bills, supply chain management, or even overall turnover revenues. When everything becomes more expensive, entrepreneurs must evaluate their best options to overcome difficulties and remain relevant to their audience group(s). 

However, Claudia Sahm, the former economist for the Federal Reserve shares a positive note for businesses: “The things that looked like they were getting better this time last year didn’t get better, they got worse … This year, things are getting notably better. [...] It feels like there’s more cause to be optimistic.”

So what can businesses do to thrive despite inflation and overcome the challenges of rising costs of living? 

Ensuring fair wages

The cost of living is constantly rising, and businesses need to consider this when setting employee salaries. A fair wage reflects the current financial situation and the different labor cost types so that employees can meet their basic needs. Paying employees a fair salary is essential for many reasons, including boosting morale, increasing employee loyalty and engagement, and helping attract and retain top talent.

However, it can be challenging to calculate a fair salary when the cost of living increases. To make it work, businesses must stay up-to-date with the market rate for similar roles in their industry and geographical area. They should also consider offering cost of living adjustments yearly to ensure their wages keep up with the current financial situation. 

Businesses should also factor in other expenses, such as housing and transportation costs. If employees struggle to afford necessities, consider offering extra benefits, such as flexible working hours or additional paid leave. Finally, employers should pay employees equally and fairly, regardless of gender, race, or ethnicity. 

Maximizing marketing efforts

The rising cost of living is causing many businesses to suffer financially. To remain competitive, companies must maximize their marketing efforts while staying on a tight budget. This essentially means ensuring that your marketing can go further without incrementing costs. 

Cost-effective methods such as referrals, press releases, and content marketing have long established their benefits for companies on a shoestring budget. By leveraging these channels, you can reach more potential customers at a much lower cost than traditional marketing methods.

Another way to make your marketing go further is to target the right audience. You should research the type of people likely to buy your product or service and focus your efforts on them. 

By leveraging cost-effective methods and targeting the right audience, you can support your business against the inflation-related challenges it may be facing.

Increasing your prices

As the costs of running a business rise, it is essential to consider increasing your prices to account for inflation. Ultimately, your expenses must reflect your financial situation. This is especially true if your business has seen an increase in demand and the cost of goods and services has increased. By increasing prices, companies can ensure that they have enough money to cover their costs, remain profitable, and continue to provide excellent service. However, this can hurt your customers. 

McKinsey recommends following the ADAPT method to re-assess your price strategies, addressing inflation-related challenges for both the business and the customers. 

Indeed, it’s important to note that when it comes to increasing prices, you must be careful not to alienate your customer base. To ensure this doesn’t happen, focus on developing a complex pricing process that also encompasses necessary promotions and discounts. 

Furthermore, when increasing prices, consider introducing tiered pricing models which offer different levels of value to cater to different budgets and needs. This way, your customers can choose what works best for them and understand why they’re paying the prices they are. Ultimately, the goal should be to provide an exceptional level of value that exceeds expectations and leaves customers feeling good about their purchase. 

Adding valuable employee perks

As businesses face increasing living costs, it’s essential to consider how you can best support your employees and help them manage their finances. One way to do this is by offering valuable employee perks that cater to their needs.

For example, flexible working hours and remote working are two employee perks that can help employees maintain their work-life balance while still allowing them to meet their financial goals. 

Other valuable employee perks may include providing discounts on specific products or services, such as food delivery services or gym memberships, or even providing small bonuses for employees who hit particular targets. These perks ease the financial burden on employees as prices rise due to inflation.

Additionally, businesses should provide access to financial literacy programs and other resources to help employees understand and manage their finances. This can equip employees with the skills they need to handle any financial strain they may be feeling. 

Cutting down business costs

In a market affected by inflation, cutting down operation costs can be one of the most effective ways to help mitigate the effects of inflation. Rising prices can have an impact on the overall financial performance of a business, so companies need to take steps to reduce their expenses wherever possible. 

There are many ways that businesses can cut down their costs without compromising on the quality of their services and products. Reviewing existing processes to make them more efficient can be helpful. Companies should also look for ways to reduce energy consumption, which can significantly impact operational costs.

In conclusion, as inflation and increased living costs can make it challenging for employees and businesses to thrive, it becomes essential to design a strategy. Essentially, companies must work on three fronts simultaneously regarding cost management: supporting employees, customers, and their operations.