There are three ways to contain costs with inflation on the rise, says Josh Bardell, Lead Strategic Consultant, PROS

With inflation growing at its fastest pace in 20 years according to the Reserve Bank of Australia, associated rising costs are arguably the biggest challenge for Australian businesses. This is making it difficult for businesses to price their products correctly and could potentially strain margins and customer relations as these companies either absorb the costs or pass them on to the buyer.

The manufacturing sector, in particular, has been under increased pressure, grappling with supply chain disruption, labour shortages and fuel price rises. Almost one in seven manufacturers agree that inflation is likely to remain elevated at the end of 2022, according to a PwC Pulse Survey.

And this situation is unlikely to ease over the next two years. If not addressed, we run the risk of further business closures and dampening our national economic recovery from the pandemic.

Adjusting pricing strategies now will support manufacturers to contain costs with inflation on the rise. Manufacturers must look to nuanced pricing approaches that allow for pricing adjustments that move as quickly as market fluctuations, to drive growth and profit, and strengthen relationships.

  1. Harness AI technology

The digital economy is evolving quickly. Costs are constantly fluctuating, and new players are entering the market. Manufacturers need better visibility into market dynamics so that they can react in real-time to protect margin.

Manual methods no longer suffice when it comes to setting and updating pricing, as they struggle to keep pace with the volume and logistic complexities associated with the manufacturing sector. Instead, manufacturers need to move from Excel-based tools to streamlined platforms to enable a clear pricing strategy with transparency into costs.

By leveraging advanced AI, automated workflows and a robust price calculation engine, manufacturers can better understand and manage pricing complexities created by constantly changing market conditions, buyer behaviour and multiple sales channels – ultimately delivering profitable prices for all.

  1. Improve employee efficiency

The Labor party recently announced a $1bn advanced manufacturing fund to help rebuild the sector and keep talent within Australia, affirmation that many manufacturers are challenged by labour shortages and costs as part of inflationary pressure.

The accuracy of AI-enable pricing technology will help manufacturers to give their employees the confidence to execute sales without the fear of making mistakes or guesswork and drive new levels of negotiations beyond mere pricing to shared business challenges.

According to Hanover research, 70% of buyers agree that personalised recommendations are empowering them to obtain more value from their vendors and more than half (53%) of respondents say that they would pay as much as 5% more for these recommendations – a staggering premium for purchasing teams who are usually incentivised to find the deepest discounts.

  1. Narrow the focus

Manufacturers that think of pricing only as transactional have the wrong mindset. Transactional pricing strategies are outdated and don’t account for rapidly changing markets. Instead, manufacturers should recognise the room for flexibility beyond simply raising prices due to rising inflation rates or dropping them because a competitor dropped their rates.

Good pricing strategies have guidelines to ensure pricing is market-relevant and doesn’t fluctuate dramatically without cause. At the same time, understanding profitability and underperforming products is key to containing costs. Manufacturers need transparency from base prices all the way down to margin, to understand pricing levers that can be pulled to gain a competitive advantage.

Enter Artificial Intelligence (AI)-based price optimisation and management. These capabilities enable manufacturers to better prepare with predictive analytics to forecast price fluctuations. As a result, manufacturers can deliver tailored, market-relevant prices in real-time, which is essential to creating a streamlined pricing strategy.

What’s next?

It’s clear the way manufacturers price a product has a knock-on effect on their customers. This is exasperated in the face of rising inflation and as a result of the long-term pressure caused by the pandemic.


Ultimately, manufacturers that are able to deliver competitive, market-relevant pricing will be able to gain a competitive advantage despite the current economic slowdown.

Now is the time for manufacturers to embrace innovative tools like AI-driven dynamic pricing to help contain costs. If not, profitability will suffer, and they’ll be left behind.