The economic climate and customer bargaining power have influenced how businesses execute pricing strategies, according to a recent survey by global consultancy firm, Simon-Kucher, which reveals that 83% of Australian businesses have passed on price increases to customers to keep pace with inflation.
However, almost three-quarters (70%) of businesses also engaged in a price war, creating a pricing tightrope for companies globally.
The survey analysed global pricing trends, identifying key factors contributing to price increases and the strategies adopted by different industries. Inflation, rising costs and market demands have led to higher prices for businesses, particularly in the APAC and Australian markets.
Pricing power
Despite implementing price increases, 83% of Australian businesses have successfully passed these cost increases onto customers, performing better at 5% above the global average. This showcases the price power Australian businesses possess compared to global counterparts.
While many initially resort to cost-cutting, adopting the right pricing strategy to transfer costs to customers allows businesses to maintain quality and service excellence. The report highlights that price pressure often stems not just from rising costs but also from customer negotiation power, low-price competitors and price transparency.
Pricing literacy
One in four businesses struggle with price increase management, often succumbing to costs that jeopardise their operations. Despite 85% of Australian businesses having revenues that either matched (32%) or exceeded (53%) the average inflation rate, there is more to improve on pricing literacy.
Maintaining profitability is still a challenge that can be addressed through properly raising prices to cover cost increases. The survey further shows that Australian businesses only realised 33% of their planned price increase, and only 6% managed to realise the full planned increase.
Expectancy for a better future
On the other hand, the report reveals a positive outlook among Australian businesses, with more than half (56%) expecting an improved economic climate in 2024 compared to 2023. This is above the global average of 52%, indicating optimism despite the challenging environment.
Changing market demands suggest that merely keeping up with rising costs and inflation is insufficient. Global businesses prioritise launching new products (46%), entering new market segments (37%) and increasing prices (31%) to navigate these challenges.
“There is no one-size-fits-all solution for the price pressures businesses face. With better identification of the underlying causes, smarter solutions will emerge. As both global and local markets continue to feel the effects of inflation, businesses must employ multiple strategies to keep pace with inflation and market innovation, directly influencing their pricing strategies,” Simon-Kucher Australia partner and managing director, Christoph Petzoldt said.