It seems that news media feel that they have a God-given right, if not a responsibility, to add even more anxiety to our already fragile psyches.  The media hype surrounding Washington’s unwillingness to set aside their political aspirations for the benefit of U.S. citizens caused a frazzled mother of two college-age kids to ask me whether she should call her broker and cash out of all her stock holdings.  Let’s take a look at the reality behind the fear mongering.

When the economy is shrinking most companies discount heavily to try to retain as many customers as possible.  Conversely, when the economy is recovering business leaders raise prices, confident that their customers are willing and able to pay those higher prices.  Here are some recent headlines:

June 24 Reuters – Coca-Cola Raising Its Prices in July By At Least 3 to 4 Percent
June 29 Wall Street Journal – General Mills 4Q Profit Rises 51% on Price Increase
July 26 IBTimes | Atlanta – Ford profit tops expectations on strong pricing
July 26 Reuters – Progressive Waste Q2 profit rises on higher pricing
July 26 Wall Street Journal – Cabot 3Q Profit Climbs on Pricing, Japan Sales
July 28 Sacramento Bee – AutoNation 2Q profit rises on pricing

These are actual results.  They’re not political rhetoric or media fear mongering, these are quantifiable results that these companies have achieved.  Indeed many companies that have raised prices are experiencing profit growth greater than the price increase.  So what’s my point?  Actually there are three points I’d like to make:

  • We can avoid much of the anxiety that Washington and the media attempt to inflict upon us by being more selective in what ‘news’ we accept.
  • While philosophical debate can be fun and stimulating; it’s results that drive personal, business and economic growth.
  • Most of the companies cited above enjoyed higher profit growth (as a  % of revenues) than the price increase they instituted.

Sorry, couldn’t resist #3 even though it’s an “I told you so” kind of comment.

Limiting Anxiety/Stimulating Growth

When you’re viewing a headline ask yourself “Does this news piece offer results, philosophical debate or speculation?”

Results-based reporting offers the most useful insights into the issue being discussed.  That doesn’t mean that the commentary around the results won’t be biased; that’s not humanly possible, as evidenced by my apology above.  Each and every one of us has a bias based on past experiences.  We can try to minimize it, but we can’t completely eliminate it.

Philosophical debates are useful because they enable us to see a variety of perspectives that can, and often do, expand our ability to see alternative solutions to the problem.  Solutions we might not have otherwise seen.

Speculation is always dangerous.  While it may be useful in identifying options in brainstorming sessions, if we never go beyond speculating to testing our ideas, learning from the results of those tests and repeating the process, we’re going to experience little success, high levels of frustration over failed attempts and a loss of confidence.  Aren’t those exactly the feelings you get when you listen to the fear mongers?

Contrast that with the feelings of confidence and excitement that you gain with results.  The choice is yours – results or speculation?

What does this have to do with pricing?  Focus on the results the companies raising prices are getting, learn from their experiences and replicate their success in your company.  There’s no reason why you, too, can’t get higher prices for your products/services.

P.S.  While Washington is nearing an agreement to increase the debt limit, it has postponed many difficult choices to protect their reelection chances.  These delays prolong uncertainty which will cause buyers and business owners to postpone purchases and investment decisions, thereby further slowing the economic recovery.

Author – Dale Furtwengler