How Your Business Can Effectively Manage Profit Margins Amid Global Disruption

In the US, inflation is near a 40-year high. If business pricing teams found the pandemic and supply chain issues the most difficult period of their careers, then the constant news influx of sharply rising prices must be cause for concern. Maintaining a consistent pricing strategy is difficult at the best of times, let alone during constant disruption to global markets.  

The struggle is real. A recent study by Forrester Consulting, on behalf of Flintfox, revealed that 92% of businesses are struggling to manage market fluctuations caused by ongoing supply chain issues, Covid-19 and Brexit.

Businesses have always tried to maintain profitability, but today’s ever-changing market is putting a new level of intense pressure on margins. It’s time then, to take back control of pricing strategies. Time to future proof businesses against whatever the world decides to throw at us next. 

Adapting to meet the pace of change

Amidst external chaos, there are steps businesses can take to maintain control, stay agile and keep things simple. If the experience of the pandemic taught organisations anything, it’s that digital transformation is vital. Almost every business has had to invest in new digital tools to stay afloat, and technology kept most businesses going, even throughout lockdowns. 

As pricing becomes a top priority in the boardroom, it follows that the digital transformation efforts that have been put into e-commerce, customer services and remote working should make their way to pricing.

And it’s sorely needed. 

It may seem surprising, but a large majority of corporations around the world are still managing agreements for thousands of suppliers using spreadsheets. This process is not only time consuming and a productivity sap, but also prone to significant errors, making it almost impossible to execute pricing at scale. It acts as a major drain on business resources at a time when many simply cannot afford revenue leakage and inefficiencies. 

Further to the use of basic spreadsheets, many margin reports are still created manually, resulting in accuracy and consistency issues. Given that 34% of UK businesses surveyed were still relying on manual processes to manage price fluctuations, it’s no wonder that many firms are currently unable to keep up with the increasing number of real-time price fluxes occurring in the market.

The way digital transformation manifests itself in pricing is through what is known as ‘intelligent pricing’.  This technology updates pricing models based on real-time data, enabling businesses to adapt to changing market forces and monitor margins across their supply chains and markets as they happen. 

Although we live in uncertain times, uncertainty does not negate preparedness. In fact, intelligent pricing affords companies the agility and flexibility to weather these market storms. Automated processes that allow for any number of complexities – as well as for differentiated pricing based on consumer, platform or supplier needs – are becoming a must in our omnichannel world. It’s no good investing in omnichannel e-commerce and sophisticated supply chain tools if pricing technology doesn’t evolve alongside it.

Beating the competition 

Staying competitive in the current environment is difficult. But striking the balance between being competitive and profitable is even harder. 

Those organisations with outdated practices around pricing will struggle to navigate the complexities of unpredictable supply chains. Many existing business models are preventing companies from being able to manage the pace of change, with 50% of UK businesses claiming that poor data quality and capture are hampering their ability to keep on top of market fluctuations.

To stay ahead of the curve, firms need lightning-fast and smart decision making for pricing – 66% want their pricing initiatives to help them stay ahead of complex pricing changes at all stages of the supply chain. This generally means automation. And even while 42% of firms have a data-driven approach to pricing decisions, this data is still manually input from disparate data sources, meaning a lot of potential agility is lost. 

This is having a significant ripple effect; with UK businesses losing on average £451,000 a year in lost profitability due to their inability to respond quickly enough to market forces, according to Forrester.

Creating a more certain future 

As inflation and supply chain issues continue to wreak havoc, it’s becoming increasingly critical for businesses to be able to respond rapidly to market fluctuations. Moving to an intelligent pricing model enables businesses to better handle operational complexities and future-proof their businesses from harmful market events as we navigate this difficult era in global history.

The research conducted by Forrester indicates that a shift to real-time, automated management of pricing, will be a fundamental business priority to manage the impact of global disruption in the year ahead, with almost one in five (18%) UK businesses set to invest in intelligent pricing technology in 2022.

Ultimately, firms that find magic in their margins and retain pricing power throughout this period of continued disruption will be better placed to adapt to further market instability and keep up with the pace of change in real-time. Digital transformation and profitability will need to remain at the top of the boardroom agenda as businesses journey to the recovery ahead. 

About the author: John Moss is CEO at Flintfox.