Organisations worldwide are diving into the second half of 2022 with innumerable disruptions as far as economic conditions are concerned. Global inflation and supply chain issues are at the top of the list of economic disruptions faced by every organisation. This global inflation has resulted in a society that has become very price sensitive as the purchasing power across the world is diminishing. To avoid any backlash on the organisation’s reputation and a sense of message fatigue, leaders now have to be mindful of how they communicate to employees and customers about changes in pricing and compensation. Organisations have to be prepared to anticipate consequences and then come forward with communication about two reputational risks that are based on global inflation.
As organisations are getting ready to adjust plans for 2022, to navigate the impact of disruptions in the supply chain and inflation on their business, leaders must plan how they must communicate. To protect the company’s reputation and prevent any kind of backlash from the customers, leaders have to dedicate some time to plan an approach that is consistent with messaging inflation.
Patryck Allen, Senior Director of Advisory at Gartner, states that customers are becoming more and more concerned about the prices being hiked amid economic headwinds. He also states that leaders must make sure that the organisation is delivering a consistent narrative, or else there is a risk of being perceived as an organisation and a leader who takes advantage of a challenging situation.
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If leaders hope to protect the reputation of the company while in the middle of significant disruption in the world economy, they must address two topics that are highly critical to their customers as well as their employees. The first is pricing, and the second is compensation.
Have early and clear communication about pricing and products
A survey conducted in 2022 by Gartner revealed that the most basic strategy used to fight inflation is to increase prices simply. Even though customers do understand that market factors have a way of increasing prices, there is a perception among customers that companies raise the prices to make more profit and that this practice is growing more and more.
As a leader, you must approach the increase in prices in a prudent manner so that the reputation of the organisation remains protected. Some feedback from the Gartner Consumer Community Survey conducted in 2022 indicates that consumers have a higher preference for organisations that announce an increase in prices with a justification and on some foundation. This can be done through press releases or printing earning reports.
On the other hand, there is a shallow level of tolerance for companies when they reduce the size or quality of the product as an alternative solution to hike in prices. Consumers are vigilant and constantly scrutinise what they purchase during global inflation. If there is any surprise change in the quality or the volume of the product, the chances of a negative experience by the customer increases, and it also risks the reputation of the brand and the organisation as a whole.
If you wish to deliver messages about changes in products and prices that also protect the reputation of the company, you should:
- Get in touch with fellow leaders in product and supply chain: This will help you determine the effect market disruptions like global inflation have on services and products.
- Align with leaders and your peers in sales, investor relations, marketing and communications, as well as customer service: This will enable you to coordinate with them on messages about the increase in prices that you can share with stakeholder groups and avoid any kind of message fatigue.
- Communicate in a proactive manner: If you can communicate proactively, with justification and rationale, to your customers, about changes in how the company is sourcing material and ingredients, it will help majorly in avoiding any type of negative perception about harmful quality products.
Have transparency about changes in executive compensation
The pay ratio for CEOs increased by a little more than 27% between the years 2020 and 2021; however, workforce compensation changes in 2021 led to a decrease in wages. With global inflation, consumers have started feeling that their purchasing power has decreased significantly and are now inspecting compensation that executives get very closely.
The 2022 Gartner Consumer Community Survey did not question the executive survey directly, especially about the hike in prices. Yet, some respondents showed an indication of their frustration with an increase in pay received by executives.
To deliver messages about executive pay that also protect the reputation of the company, you should:
- Get in touch with your peers that handle HR, communications, legal and investor relations: This will help in understanding what the audience’s perspective is about the upcoming proxy votes for executive pay or any other changes that can be made to executive pay in your organisation. Avoid any type of link to the pricing of products.
- Prepare an FAQ set or another document that has information for the shareholders of your company: This should be done just before and after the executive pays proxy votes.
- Communicate proactively about inflation-triggered adjustments: This should be done for adjustments to the compensation of the broader workforce, together with changes in the compensation of executives.
Ultimately, consumers are not yet blaming price hikes on companies, but with global inflation likely to increase the way it is for the rest of the year, put some consideration into how you wish to talk about compensation and pricing while making sure the reputation of the company and organisation is well protected.
Reference: How Leaders Should Communicate to Employees and Customers About Inflation|Gartner|Jordan Turner | July 15 2022
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