On Tuesday, the US government announced a ban on the import of Russian oil and other energy products. Gas prices were already rising in the US, with the average price hitting an all-time high of $4.17 a gallon and, in some states, touching the $7 mark. Just two years ago, at the onset of the pandemic, gas was $2 a gallon cheaper.

The average American could be paying $100 a week to fill their tanks to travel to work, and that is going to bite into their already thin disposable incomes.

At the same time, the gas prices are going to affect the costs of logistics for manufacturers, and that will start another spell of inflationary pressure.

Europe is more dependent on Russian fuel than the US, but the EU and UK have both announced plans to become less dependent. In the short term, the US approach will have knock-on effects in the EU, and we expect inflationary pressure to come to bear in those markets too.

It should be noted that on Tuesday, the US government cautioned the energy companies against taking advantage of the situation. That guidance should be extended to all companies as they seek to manage their businesses through this period. Marketers have a central role in how this plays out.

Insights for What's Ahead

Here are six key considerations to help shape your actions for what’s ahead.  

1. Focus on the economy: Ensure that your marketing and communication teams are aware of the trends in the economic metrics and what is driving them. Without the right information and a considered approach, your stories around the price of your products and services will not resonate.
2. Revisit what you think you know: Reevaluate your existing customer segmentations and get back to understanding the people you serve. Explore their reaction to price increases and their pain points around spending money. Inflation does not hit everyone equally, even those with the same disposable income. Develop pricing and promotional strategies accordingly.
3. Size is important: When input prices rise, all marketers immediately think of two things: pass the price on (net of costs that can be cut elsewhere) to the customer or reduce the cost of what is produced by reducing size. This is as true for services as it is for products. This often leads to value packs, supersizes, and bundles. All these tactics are valid, but remember that the biggest opportunity during this time is to win the appreciation of your customer, and that can last long after inflation has begun to recede.
4. Branding is even more important: One of the most powerful ways to maintain the perception of value is, of course, to nurture the emotional and rational story of your brand. In many sectors, there will be the temptation for people to trade down to lower-priced or own-label brands. Remember that branding is not only applicable to consumer products. It is equally true of business-to-business offerings, service companies, and even institutions. Marketing still works, especially creative promotions to gain share, but they must be served in the context of the inflationary environment to be effective.
5. Digital has changed the balance of power: In previous inflationary periods, the digital ecosystem was not as developed as it is today. We have no historical evidence for how this will affect customer behavior. With huge penetration of devices and connection, all consumers are more actively able to compare prices for all products and services at any given moment. This will increase the dangers of leading with raised pricing too soon or breaking notional price points when your competitors do not.
6. The truth matters, but not to everyone: Finally, in communications, there has been a relentless march toward greater transparency and the shared narrative. Very few brands or companies talk openly with their consumers about the challenges of inflation and the reasoning behind price increases. It is difficult to do so, and not many end consumers will care. Having a clear, concise, and compelling narrative for pricing, packaging, product, and promotional cost/value management actions is critical. Therefore, think carefully about how you will explain your approach to your stakeholders.

Of course, these six action areas are interlinked. No one area alone will suffice to help you win in the situation that lies ahead. Neither are they the same for all types of businesses because consumers may be affected differently by rising prices. Premium luxury brands that cater to the very rich will think differently than those who manage everyday essentials at affordable prices. Business providers who have differential and critical expertise with little competition will have to respond differently than those who are in more commoditized service sectors.