Why raising prices is a huge mistake

IN SUMMARY: We are not even 90 days into the new year and already a number of CPG companies are planning to raise prices. This is a huge mistake because, despite the job market, consumers are still hurting and haven’t seen real wage growth.

The tax cuts enacted by this administration ended up being more like a sugar high. They gave the US economy a brief jolt while triggering an $800 billion hole in the federal budget.  The average American worker is still waiting for the promised economic boom which may never come.

Economic growth is not really benefitting the average American worker

Nearly half — 48 percent — of Americans say they believe economic conditions are worsening. That’s up from 45 percent in December and 36 percent in November, according to a January Gallup poll.

According to The Economist “slow income growth has been the most persistent problem afflicting the US economy since the recession ended, around 2010. Wages have barely kept up with the cost of living, even as the unemployment rate dropped and the economy expanded. It’s true that wages are rising faster than they have in a decade, but that’s only because the US economy collapsed 10 years ago. Comparing current wage growth to recession-era wage growth sets a pretty low standard.”

Brands aren’t sympathetic

So despite this bad news a lot of brands are raising prices and some are even raising prices while cutting product sizes and we are supposed to be surprised when we read that brand loyalty is declining in the grocery aisle.

Brands are corporations and most are interested in the balance sheet. Consumer know this which is why brands like Trader Joe’s are doing very well. Why should I buy Kellogg’s Frosted Flakes when I can get a store brand at 1/3 the price?

The tax cuts that went into effect rewarded shareholders and CEO’s whose paycheck is connected to the share price. Consumers aren’t dumb, they know this and when a band raises prices they fell that the brand is sticking it to them.

Raising prices is a huge mistake and brands are going to feel it where it hurts most….in declining sales.

Why raising prices is a huge mistake

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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