Jolyon Bennett, CEO of Juice
When Lloyds Bank spoke to around 1,500 small and medium-sized business owners in December, 53% of them said they had raised prices for customers in response to rising costs.
Viewed from one perspective, this can be considered a low number. Almost every UK business has been hit by high inflation – currently at 10.1% – with energy prices, higher input costs and rising wage demands combining to create a perfect storm. The obvious way to respond to rising costs is to charge customers more.
But then again, not everyone is in a position to do this. High inflation is also hitting customers’ pockets. If a company raises prices – even slightly – some customers are likely to look for decent alternatives.
This poses a real dilemma for SMEs and enterprising companies. Is it better to swallow rising costs and accept reduced margins in an attempt to retain valuable customers? Or is it more sensible to recognize that prices need to go up and communicate that fact as effectively as possible?
There has been some pressure from the Government for the former. Last year, newly appointed Cost of Living Czar David Buttress urged companies of all sizes to take action to lower prices for consumers. Speaking at a conference of the Confederation of British Industry, he asked delegates to come up with ideas for fighting inflation.
But is it feasible to cut or keep prices low for customers?
Jolyon Bennett, owner of British consumer electronics company Juice, believes so. And perhaps most importantly, he’s betting that taking care of customers will pay dividends in the long run.
Pricing
It’s not every day that a company contacts me to proudly claim that their profits have plummeted. There is a perhaps understandable tendency among business people to accentuate the positive. However, as Bennett emphasizes, the drop in profitability was directly related to the decision to set prices and also maintain commitment to sustainable environmental practices.
Juice – which is still wholly owned by Bennett – was created in 2012 and over the past decade its brand has become quietly familiar in the UK market. At first, it focused on producing brightly colored charging cables for smartphones and tablets. That remains the core part of the business, but it also sells products like DAB radios and smart speakers.
The first cables were sold through the John Lewis retail chain, with 3,000 of the initial order of 5,000 sold within days. “Consumers liked the fun and the design,” says Bennett. “They were giving away chargers as a gift.” The nascent brand quickly expanded and today the company’s products can be purchased at stores such as Tesco, Rymans and Argos.
Prioritizing Customers
But, as Bennett acknowledges, the post-pandemic landscape has been tough. Costs have risen, the company has made profits of over £1 million in 2022 compared to the previous year due to currency fluctuations and rising costs. Sales also fell by around 6.7%. Inevitably, the company was faced with the question of whether or not to raise prices. Bennett decided to prioritize customers.
“I’m very grateful to our customers and what they’ve done for me,” he says. “I wanted to do things right to lessen the impact of the cost of living crisis.
In his opinion, passing on the cost increase faced by Juice would result in a £2.50-£3.00 price increase on a charging cable. “That might not seem like a lot of money to me. But it’s too much for some people.”
At the same time, the company has also invested in environmentally friendly packaging, or more precisely in recyclable plastic. Again, there is an impact on earnings.
But won’t there have to be a readjustment at some point? Bennett’s view is that Juice can afford to see a drop in profits to help struggling customers. Fair. But while the inflation rate will certainly come down, business costs are likely to remain high. Won’t the prices charged to consumers have to jump at some point?
“Our plan is to grow,” says Bennett. “And to become more efficient. The goal is to be even better at what we do.” That will, he says, involve selling into new markets, including the US.
Meanwhile, sales are up 15% this year and the company is also claiming a 4% increase in market share.
In that regard, there is a business rationale for setting prices and driving an environmental tread, especially when the customer base is price sensitive. Both strategies help build customer loyalty. But this is clearly not a strategy that all companies can adopt. As Bennett recognizes, as a 100% owner, he is in a position to make decisions without unduly upsetting other shareholders. It is also much easier to make a profit if the business is in good standing.
But caring for customers is part of the equation when enterprising companies weigh prices in the face of inflationary pressures. A short-term success can be an investment in the longer game.