What the Heck is…
CPI?
The Consumer Price Index (CPI) is a program overseen by the Bureau of Labor Statistics that tracks monthly changes in the prices consumers pay for goods or services. Its cousin, the Producer Price Index (PPI) measures pricing in the production process. “Ok,” you’re thinking, “that would be great to know if I were in an economics class. But what does that have to do with small business?”
Answer: The CPI (and PPI) affects both ends of your business.
On one hand, when your suppliers have to pay more to manufacture goods, that increased cost will get passed on to their customers (you), and your pricing might have to increase in turn. On the other hand, when your clients know that you’re paying less for the things you need to keep your business running, they will expect reduced pricing.
How can you use the CPI to your business’s advantage?
- Keep tabs on the change in price people are paying for your goods or services.
- Don’t forget to also look at what your suppliers are paying to make their products.
- Don’t be scared to ask your suppliers for price reductions!
- Be prepared to pass your savings to your customers. It’s a memorable discount that says “I really know my industry!”
- When preparing to submit pricing, use historical indexes to better understand the incumbent's pricing strategy.
For more information and for the data tables, please visit http://www.bls.gov/cpi/
By Shannon Wampler, Senior Supplier Diversity Coordinator, University of Virginia. Follow her on Twitter: http://twitter.com/saw2w
