domingo, junho 19, 2022

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"Why Companies Raise Their Prices: Because They Can"

"In 2021, US companies logged their most profitable year since the 1950s, as many took advantage of economies of scale and other more efficient production processes. Yet, firms increasingly held on to the savings they gained from these reduced costs, rather than passing them on to customers in the form of lower prices.
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markups—the difference between prices charged at checkout and the marginal costs incurred by a company in order to make a product—climbed about 25 percent between 2006 and 2019
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The researchers came to a startling conclusion: Consumers were 30 percent less price sensitive—meaning less likely to abandon favorite brands and seek cheaper equivalent products—in 2019 than they were in 2006.
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Meanwhile, company costs have declined over time as firms have squeezed more productivity out of increasingly efficient operations. Since 2006, marginal costs have dropped by 2.1 percent annually on average, the authors estimate. In the latter part of the study period, from 2017 to 2019, firm costs were about 25 percentage points lower versus 2006.

Rising markups come from either price increases or marginal cost reductions."


"In all, we examined 846 large publicly traded corporations last year through the lens of 34 separate indicators in five categories: customer satisfaction, employee engagement and development, innovation, social responsibility and financial strength.
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To build our ranking, companies are compared in each of the five areas, as well as their overall effectiveness, through standardized scores with a typical range of 0 to 100 and a mean of 50.
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In our latest research, prompted by concerns over inflation, we explored the correlation between net profit margin-the percentage of profit a company produces from its total revenue-and customer satisfaction for 2021.
Of the 24 industries we looked at, 11 showed no meaningful statistical relationship between the two. Others, however, stood out. In six industries-household and personal products, autos, telecommunications, consumer services, banks and pharmaceuticals-there was a significant positive correlation between profit margin and customer satisfaction.
This means the two variables move in the same direction.
When one goes up, the other goes up; when one goes down, the other goes down. And it implies that, in general, firms in these industries have a fair bit of leeway to raise prices without making their customers disgruntled.
"We call this pricing power,'
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At the other end of the spectrum are companies in industries with a negative correlation between profit margin and customer satisfaction. Across these sectors, when net profit margin goes up, customer satisfaction goes down-and vice versa.
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What's more, any company with low customer satisfaction may well have trouble raising prices-regardless of the industry it's in. "It's a delicate calibration,""


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