When Raising Prices Is Better Than Cutting Quality

When costs rise, companies often look beyond price increases to protect margins. But cutting product quality, or “skimpflation,” can carry the greatest long-term risk. Across 25

When faced with cost increases, managers may need to make tough decisions. Generally, there are three options that managers can consider in these situations. One option is to maintain current prices, meaning the firm absorbs the higher costs and settles for lower margins. A second option is to raise prices, passing increased costs to consumers to maintain profit margins. A third option involves indirectly raising prices by reducing what consumers get for the same price.