The Wall Street Journal reported today the statistics from the Department of Commerce that suggest US companies should expect a profitability squeeze. The low inflation of 1.2% in Q1 2017 shows that US companies have yet to regain pricing power. At 4.1%, the aggregate wage growth in March 2017 signals expectation of increasing pressure on margins. The next-big-thing corporate tax proposed by President Trump could help but may not materialize in time, if at all.
Companies will have to fight for margin. With sharpened pencils, customers with trained procurement professionals will demand new concessions. In response, companies could cut operational costs or throw caution to the winds by lowering prices without a proper defense .
When, not if, CEOs call for margin protection measures, the need for solid pricing plans — for new product launches, price increases and, most importantly, developing efficient operations to contain uncontrolled price exceptions — will become readily apparent. It is time for Finance, Marketing and Sales leaders to converge on developing playbooks with a practical pricing strategy and clear step-wise instructions for front-line execution teams to ensure sustained profitable growth.