Household, auto categories best-placed to raise prices | WARC | The Feed

Household, auto categories best-placed to raise prices

Brands in the household, automotive, telecoms and pharma industries are among the best-placed to raise prices without alienating customers in the face of rising inflation, according to a new study.

How the analysis worked

• The study, published by the Wall Street Journal, covered 846 major publicly-traded firms.
• It incorporated 34 indicators across five categories: customer satisfaction, employee engagement and development, financial strength, innovation, and social responsibility.
• To gain a clearer view about raising prices, the research zeroed in on the correlation between net profit margins and customer satisfaction, as tracked by research firm J.D. Power, in 2021.
• Some 24 industries featured in the analysis. Individual companies were awarded an index score between zero and 100, with a mean score of 50.

Best-performing industries

• Six categories registered a “significant statistical relationship” between customer satisfaction and net profit, meaning when one metric rose, the other did, too.
• As such, they were “thought to be in a relatively strong position” to pass on rising costs to the end consumer.
• Leading these charts were household/personal products, ahead of automotive, telecoms, consumer services, banks, and then the pharma, biotech and life sciences sector.
• Higher levels of brand loyalty and differentiation were among the potential contributors to this outcome.

Worst-performing industries

• Several categories logged a “significant negative correlation”, suggesting brands could witness greater pushback if they raise prices.
• They included consumer durables and apparel, technology hardware and equipment, energy and transportation, such as airlines.
• Food and staples retailers, software and services, and commercial/professional services also struggled on this metric.

P&G is a leading example

• Procter & Gamble, the consumer packaged goods manufacturer, was an example of a high-performing company.
• Its customer-satisfaction rating for last year stood at 70.4 on the study’s index, placing it within the leading 1% of enterprises.
• That would imply it is well-placed to raise prices if required. But factors like market share and competitor activity must also weigh into any such calculations.

About the study

• The study’s authors were Rick Wartzman, head of the KH Moon Center for a Functioning Society, and Kelly Tang, senior director/research at the Drucker Institute, parent of the KH Moon Center.

Sourced from Wall Street Journal