As the first quarter of 2023 gets underway, people have mixed expectations of what the year will bring. Here are three difficult questions every business will have to answer in the new year.
- What if high inflation continues?
In any standard economy, some amount of inflation is normal. The problem starts when inflation goes high and is sustained over long periods. Last year, many businesses and consumers were taken by surprise when drastic changes happened in the economy. Products that have enjoyed stable prices over long periods were suddenly increasing in price weekly – in some cases throwing shoppers and traders into a state of shock.
For 2023, it will be good for managers to build three scenarios: a positive version with the best outlook of everything; a negative one that is opposite to the positive; and a realistic view which is updated monthly. Armed with these three views, organisations can run and not be surprised. For example, consumer goods products can define a pricing matrix. So when inflation reaches a certain point, they move prices in a predefined step to match. This will avoid a lot of panic reactions and inefficiency in the market.
Of course, it is crucial to keep an eye on what competitors are doing. Are they also increasing price or downsizing packs, are they reformulating or launching cheaper products or services? What creative ways are similar organisations using to cut costs? Organisations that learn from last years’ experience will have options to explore this year.
- What if employees can no longer survive on their salaries?
By the end of 2022, several organisations in Ghana were nearing a point where the average employee take home salary was simply no longer enough to take workers home. If negative trends continue into 2023, this situation will graduate from a threat to a clear and present danger.
Thankfully, there were some interventions last year whereby companies tried one-off bonuses and relief packages. Some gave out grocery and transport packages, while others paid double salaries. These measures may prove useful again if the problems return. However, the challenge will be how to manage the effects of such interventions on overall business profitability; because if companies spend more on people and related costs, they will naturally try to cut costs elsewhere to balance their finances.
The painful truth is not every company will have the mind or muscle to do more for their employees. That is why lower-paid employees will change jobs for even slight increases in pay. If this happens, there might be complaints over wide pay gaps between the top earners and low earners; and people will say things like: “Why is our company employing so many senior executives on fat packages? Why are we spending so much money on fancy advertising and high profile events, when employees are hungry?” Depending on the organisation’s posture, there could be more pressure on wage discussions – and it will be good for leadership to have a comprehensive plan ready for such a situation.
- What if consumers stop using our products?
As a marketing leader, I know consumer choice is the vote of confidence in a brand; so the moment consumers stop picking a product, there is a problem. We know from consumer behaviour that when times are hard, people make choices. When people are pressed to the wall, they will only spend on the most essential items or cut back on non-essentials.
For companies that sell products that can be considered non-essential, there could be three routes out of the situation. One way is to innovate and introduce an adjacent product that is more essential to the same audience. A second way is to find new audiences for the existing product if penetration is low. And third might be to do an upgrade and add a reason-to-believe that convinces people the product is now essential. None of these is easy, but businesses have no choice; because without the consumer’s purchases, the company cannot survive for long.
Innovation in product, service and process can be a game-changer in such situations. The important thing is to ensure the innovation effort focusses on big-ticket items that can move the needle.
In 2023, more than ever, an agile mindset will be important. Organisations that monitor the market and wider environment closely – and have scenarios ready to react quickly, will give themselves an advantage.
>>the writer is a Marketing Leader with a track-record of delivering growth while managing or consulting for some of West Africa’s most familiar brands. Eric is a people-centred leader who combines the power of marketing with the execution rigour of general management. He specialises in brands marketing and strategy, business management, communication, media and PR. Contact [email protected]