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The pricing crunch

March 22, 2011

gas-prices

There have been lots of positive signs that the US economy has been picking up momentum in recent months, but the data isn’t consistent, for every couple of pieces of good news, there seems to be a piece of OK, or not so good news.

Clearly, growth is dependent on consumers reaching into their wallets and spending again and ideally for most marketers, just like they did before the recession.

The path to spending growth doesn’t appear to be linear as its fragile trajectory can be shaken at any moment.

Confidence is obviously key and there have been signs that that has taken a dip in recent months, but the thing concerning most economists right now are gas prices, which with the Middle East situation(s) seem unpredictable at best.

Nielsen has done some nice work with the data, shown above, to illustrate the significant impact increasing gas prices have on consumers ability to spend, so it makes sense that economists are worried.

However, on top of that we also have the reality of rising prices all around. With commodity prices on the increase, companies have had little choice, but to pass these costs onto consumers and if they haven’t already, they soon will do.

The brains at MTT have put these price increases into perspective for us with its Billion Prices Project that takes available pricing from online retailers everyday and examines the shifts.

bpp

As you can see from this graph from MIT’s BPP, the increase has been pretty steep in recent months.

The Fed was concerned about the damaging effects on inflation, now it’s clearly rampant, what they can do about it and how they can promote consumer spending in its shadow, seems like a tough problem to crack.

For brand marketers, it’s going to pay to remember what we’ve just been through and ensure you remind consumers just how essential, relevant and valuable your brand is to them.

Without that kind of reinforcement and reminder, consumers will cast you aside as a non-essential.

Posted by Ed Cotton

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inflation
pricing
recession