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How Is Inflation Affecting The B2B Market?

If you’re a start-up business or you’ve been in the game for a few years, you’re likely to be all too familiar with the impact of inflation. The current financial crisis is being felt across the world, causing customers to think twice about what they buy and to who they are loyal.

According to a recent study, from June to August last year, UK company failures leapt by 81%, with 2 in 3 small businesses stating that it is “very likely” they will permanently close if inflation were to continue at its current rate.

The reason these businesses have closed, however, resides mainly in customer revenue. As mentioned previously, the cost-of-living crisis has caused customers to stick rigidly to essential purchases rather than a luxury.

Many of the businesses that are struggling, therefore, reside mainly in the B2C department. When it comes to B2B, most purchases are made by clients who actively need the services or products that the supplier is selling.

So How Is Inflation Affecting The B2B Market?

If your small business is B2B orientated, then what should you be focusing on to avoid the worse effects of inflation? For B2B companies, the five most prominent difficulties that have arisen due to inflation are:

  • Lower Innovation Incentives
  • Higher Manufacturing Costs
  • Rising Raw Material Costs
  • Elevated Shipping Costs
  • Lower Client Retainment Rates

When it comes to client retention rates, as many as 65% of B2B brands have stated that they have plans to implement a B2B incentive programme in the next 12 months, with 57% of programs still relatively young in 2023 – having been going for under two years.

This would be one of the main reasons why lower client retention rates are an issue. As mentioned before, if you have marketed your product or service as an essential purchase for a client, then that gives them an incentive to buy it. It does not, however, give them an incentive to buy it from your company. It is important – especially if you have raised your selling price to fight against rising manufacturing and shipping costs – that the customer has an incentive to stick with you.

How To Alleviate The Issues Of Inflation

It is hard to configure any kind of solution to higher manufacturing, raw material and shipping costs. This is, after all, the impact that inflation has had around the globe. Instead, the incentive for your company should be on retaining customers and keeping them loyal to your brand rather than looking elsewhere.

Revenue growth rate can jump from 60% to 70% when it comes to existing customers, with 5% to 20% for new ones. It is important, therefore, that your company has a strong, working incentive plan that can keep customers invested in what you are doing, with a rewards scheme in place to give them an incentive for continued purchases.

This is also where the “lower innovation incentives” can be tackled. It is clear that, with rising costs in traditional areas of custom, the incentive to innovate and build upon the existing brand is weakened. When it comes to keeping customers loyal, however, it is vital that your business can adapt to the times and focus on growth rather than survival.

Remember, if you do not know how to be innovative as a company during inflation, then another company will. Start-up or long-term innovation is always key to a prospering business, and it could prove essential to an efficient customer retention strategy.

Focusing A Budget And Striving For Growth

When attempting to navigate the new financial climate, it is also important to focus your budget rather than cut it. That is to say, whilst costs must be saved in some areas, they should not be cut from others, like marketing.

As a B2B company, when you market your product – utilising either social media or traditional means of marketing – you are not just marketing to new, potential customers but to your existing ones as well. A clear content plan that can engage and integrate your clients more closely should build your revenue, so don’t be afraid of keeping to or even increasing that budget to reap significant results.

Navigating the market during inflation is not easy for any company, but with the right choices and a concrete plan, there’s nothing that says you cannot succeed and continue to build your business in the right direction.

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