Have you noticed that the large pizza from your favourite restaurant no longer looks like the large pizza that it used to be? Less cheese or perhaps mushrooms enough to count with your ten fingers. That’s because the basic price of pizza ingredients has increased, but the restaurant doesn’t want to increase the price so they cut some of their costs.
Skimpflation is a new reality. It’s a leadership and economic issue rolled into one. Failing to address it will put your brand at risk and diminish your competitive edge. Especially during a recession.
With skimpflation, prices don’t go up, but product or service quality and quantity go down. It is something that companies experience when they want to make profits in tough economic times.
And it’s not just happening in the restaurant industry. You’ll find yourself wondering why the furniture you ordered takes more than a week to have it delivered in your home. It’s not because there are a lot of orders but because the furniture store only has a few staff on their payroll. Their delivery guys may have reduced from five to two men just so their store can remain open.
Did it also cross your mind why a lot of flights have been cancelled too? Extreme weather conditions is the usual factor. But with the recent cancellations, critical short staffing was also to blame.
How about being told that you’re next in line in the call but you’ve been waiting for customer support for over an hour? With these two different situations, they have something in common. Both businesses have skimped on their human resources. And it led to customer frustration.
So how can your brand overcome this?
1. Make a plan to provide maximum value at every opportunity
Increasing price and raising margins are not the only ways to improve profitability. Inflation is a reasonable driver of price. However, you are justified in raising prices when you bring greater value to the table. Where can you offer a higher-quality offering, experience, or solution? People are willing to pay more for your product when they perceive it as better than that of your competitors. This is your chance to “think outside the box”. Give your customers a new level of service. Use your sales experience, in helping customers think through problems and how to address them, to provide additional value.
2. Set the bar high with your people
Raise the bar, set high standards and inspire your team to reach those standards, and you will create a culture of excellence. Your business’s culture is made up of the habits, beliefs and behaviours that shape it. You’re the one who has to be intentional about establishing the standards, train your team to meet them and properly allocate resources.
3. Be careful, but not shortsighted, when it comes to your costs
Get your money under control by understanding what you spend, and then create limits for those expenses. Otherwise, you will find yourself short-sighted looking for reductions on a monthly or quarterly basis without a proper focus on the impact of the cuts, which is like trimming your hair without seeing the big picture.
While skimpflation is an inescapable reality, your response to that reality will determine your trajectory into the future of your business. Rather than falling victim to it, you can fight it by balancing short- and long-term financial objectives, thinking strategically about value and inspiring people to high levels of performance.
