![]() Mac’s elevated prices did not cut into business. “It was very scary.”ĭespite those fears, Mr. “We were looking at our sales and our orders daily, and we were checking every review to see what people were saying,” Murphy said. When the business finally hiked prices, Murphy said the decision was “painful.” Fearing customer backlash, the restaurant accepted smaller margins instead of pricing out their diners. Mac’s mac and cheese restaurant in Manchester, New Hampshire tried boosting prices a little at a time to keep up with inflation in 2021, but it wasn’t enough to cover the cost increases to the business, vice president of operations Mark Murphy told CNN. “As a consumer during inflation, you know the costs for companies are increasing, so, therefore, you become more receptive to a higher price,” he said.Īpproval of price increases could fuel even higher pricing in the future - a cycle that can be hard to break, said Zhang. More than 82% of businesses surveyed said demand factored into their pricing decisions, while only 52% of businesses said they take the overall rate of inflation into account when setting prices.Īre customers too willing to pay higher prices?Ĭustomers have become trained to tolerate price hikes, said John Zhang, a professor of marketing at the Wharton School at the University of Pennsylvania. In other words, it’s Econ 101: Good, old-fashioned supply and demand. That means a business can essentially set prices as high as it wants, as long as they aren’t so high that they drive away the customer base. ![]() The survey of 700 businesses across New York, Atlanta and Cleveland found that strength of customer demand outranked all other factors that companies weigh when setting prices, including steady profit margins and overall inflation. However, according to preliminary findings in a New York Federal Reserve survey, there might be something else at play. While the usual culprits cited by economists include pandemic-era supply chain bottlenecks, the war in Ukraine and various US economic policies, others say it’s due to “greedflation,” the idea that companies use higher inflation rates as an excuse to jack up prices and grow their margins. After two years of surging prices, economists still can’t agree on what has caused the world’s worst inflation crisis in decades.
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