It remains important to keep an eye on the cost of petroleum, as it is so directly linked to the consumer pocketbook: The cost of a commute can restrain spending in other areas, and the price of gas quickly translates to higher prices for any other product or service. An update on the dynamics of this commodity was published this morning in the New York Times.
Implications: As I’ve presented before in this space, many companies used a discounting response to survive the Great Recession. That means some companies have spent more than two years training their customers to buy only at a lower price. That could be a problem if the cost of petroleum or other factors force prices up.
As the recovery gains momentum, it will be important for any company to get back in touch with their core value proposition: Not just price, but the benefits and reasons why people buy a product or service in the first place. If not because price sensitivity must be mitigated, then because competition is sure to escalate as the economy improves… and a race to the bottom of profit margins can be a dangerous thing.
Mike Anderson
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