Have you been to establishments which raised their prices to naively attempt to balance their poor revenue, and then inevitably shuttered for good not long after?
I love simple good food. Good food does not have to be expensive, and frankly, expensive food are not necessarily good, nor good value. But good quality food at affordable prices, in relative comfort, that would be something to enjoy.
Recently, one of the Asian establishments I frequent, seemed to have taken a turn for the worse. For one, the spice bottles are gone, replaced by the need to specifically ask for them in small packets from the order counter. And, the quality of the food has changed. For example, the savory gravy is reduced, portions smaller, and prices – higher. One elderly lady at the order counter told me she herself was perplexed why prices got higher despite poor sales.
I have seen my fair share of companies large and small, in the course of my consulting work, which took a contrarian stance to pricing in relation to revenue. When the going gets bad, some of these companies actually raised their prices, hoping to balance the reduced revenue and profits. However, this stance almost certainly reduced these companies to their knees and all of them disappeared not long after. After all, if customers did not patronize these businesses, higher prices would have frightened off any existing customers and prospects, nailing the final nails in the coffin so to speak.
When the economic climate worsens, and competition becomes more gruesome, businesses often have to bite the bullet by several means. First, the value of products and services have to become better, either by offering more for the same prices, or for some brands, maybe even by reducing prices, painful as it may be.
Some employees seem to imagine a linear progression to their remuneration regardless of the economic condition, the sustainability of their workplaces, and most important of all, the actual performance and returns they contribute to their employers. This is akin to raising prices at the expense of all other conditions, without an equitable raise in standards, deliverables, and value.
Therefore, whether in the case of individuals or business entities, the need to stay competitive and thrive will become more intense especially in the downward spiraling climate. We have to ask ourselves frequently the same question – What value are we bringing to the table?