Read the story! You decide!

The Big Mac Index so described by the Economist has seen the price of McDonalds burgers more than tripled in the 40 years of reporting. And they are still in the business of selling burgers to the masses!

What is this index? The Big Mac Index published since 1986 measures the cost of a Big Mac in different countries and indicates the difference in purchasing power parity between them.  

How did McDonalds do it!

McDonalds generic competitive and growth strategies are designed to maximize efficiency, minimize costs and ensure profitability. Its pricing strategy includes price bundling along with psychological pricing that encourages customers to buy more products. Its a formulae for success as profits indicate.

 A different approach is used by another mega US retailer. Their strategy aims to keep prices steady following a business model, described by the company’s finance boss as ‘arrogantly simple’, to hook shoppers by offering high-quality products at the lowest prices.’  The company attributes its enduring success to this approach.  

What’s your Business model?  What Strategies do you use to be competitive!

During this period of inflationary pressures and price increases running a successful Business is challenging for most, whatever your industry.

You may be one of them, a small Business owner, faced with the rising costs of doing business. Increased costs for supplies, commodities, labour and energy. How do you tackle setting price points that keep customers happy while still maintaining reasonable profit margins.  It's push - pull economics! 

For example, a recent news headline ‘price hike on the menu for Aussie pub classic’ suggests possible further price increases to menu favourites Burgers, nuggets and chicken fillets. This follows as a major poultry producer warning of higher production costs that will need to be recovered.

Similar sentiments expressed by a local hairdresser, saying he was forced to absorb rising costs to avoid passing them onto his customers and possibly losing them as price can be the difference between someone coming to his salon or going somewhere else. He cited increased cots of electricity, rent, products and superannuation, and is the hardest time we've ever known at running a business. 

 Are there any answers, solutions! 

Yes, consider these Strategies.

Look at margins: Most retailers boost profits by marking up prices. Short term cost impacts can be managed thru margin initiatives, but these need careful planning to avoid losing customers.  Engaging with your customers is critical during these times

A different approach is to keep markups low while charging a fixed membership fee. Customers enjoy rewards and discounts in return for their loyalty. 

For example, loyalty and rewards programs rather than prices have emerged as the trend with consumers choosing where to shop, not based on price but on the programs offered. A recent study found a rise of 18% by Australian shoppers using loyalty points over the past year, saying discounts were the most important perk. 

Home Brands: keeping it in the company can have cost-savings. We have seen this recently with major supermarkets reporting record demand for Homebrand products. Some major Retail stores also use this approach offering Homebrand products, including clothing, homewares and stationery items. KMart cited as an example with ‘a range of lowest priced goods, with no comprise of quality’. 

Specialty Retail Stores: may operate at a higher price point relying on ‘brand’ exclusivity, stocking designer labels. It's about knowing, establishing your target market, your product niche and adopting robust marketing activities.

Variable pricing strategy: adjusting prices at various times. A model adopted by a popular ride operator, where prices are raised during high-demand peak times.   

This strategy most recently proposed by a fast-food giant, who in response to criticism of possible price surges clarified, saying, ‘prices won’t quite skyrocket in the same way’ but customers would pay a lower price at a 10am breakfast than during the 7.30am rush hour’. 

Managing product lines: Limiting stock items allows better focus on maintaining quality, allows better use, efficiency of floor space and with fewer wares stock turnover is faster meaning less capital is tied up in inventory. Know your ‘best sellers’ without compromising choice. 

Provide quality and value: offering great tasting food that provides exceptional value has never been more important (according to a Collins Foods executive).

Providing quality goods and services and value for money, it's a mantra applicable to any Business. 

Staffing Matters: consider paying above award rates to attract and retain staff. This can also entice better skilled and more qualified people to join your workforce, providing savings in the longer term.

Invest in Technology: investing in AI, digital technology is the way forward. Smart small Businesses are engaging in education and better understanding how machine learning and AI can automate business management. For example, cutting the time spent on administrative tasks. With still some labour shortages and supply chain issues AI solutions are worth investigating.

Buy bulk: where possible negotiate better deals and discounts from your suppliers for large quantity purchases. If you have capacity for storage this can be a great saver. 

Maximise space: Your premises, whether warehouse, office or store its critical to manage and maximise space effectively. Avoid frills, unnecessary displays, unused equipment or furniture, keep it simple, compact and streamlined for best and maximum exposure. Make your space customer friendly! 

Business Plan: Every Business needs a Business Plan, a Model, that clearly states the aims and objectives, the desired goals, and the strategies needed to run and grow a successful Business. If you need help with your planning contact Blackburn Accounting. We are your family Business specialists.  


Takeaway message: The Humble ‘Burger- A great takeaway meal or measure of Business success!

The relationship between the burger and economy is complex. As we grapple with economic challenges, now and future, it will be interesting to see how the humble burger evolves and adapts. Likewise, across a range of goods, services and commodities,  what changes will we, Business and consumers need to undergo to survive ever-changing economic conditions!