CFOs stuck between cost inflation and price-sensitive consumers

Might be time for finance chiefs to enroll in some price sensitivity training.

Price sensitivity among consumers is on the rise across industries: 57% of CFOs reported an increase in consumer price sensitivity in their sector, according to a February Grant Thornton survey of more than 230 finance leaders across industries.

Still, a large majority (84%) of the CFOs reported passing “some cost increases” to customers in the course of the last year.

Companies are feeling the squeeze, too. Nearly six in 10 CFOs said they had to restructure “cost and operational efficiency practices” within the last year as a result of inflation.

In response to affordability and pricing pressures, advanced pricing models—including those using AI—“are increasingly being used to balance customer sensitivity with profitability, including segmented pricing for different customer groups and dynamic pricing based on demand or inventory,” the survey’s authors note. “While 16% of organizations have fully implemented these approaches, another 35% are rolling them out more broadly across the business.”

“AI and productivity improvements are helping companies protect margins while remaining responsive to customer price sensitivity,” Paul Melville, chief growth officer at Grant Thornton, said in a statement tied to the release. “The most effective pricing strategies are rooted in value, not just cost recovery. If the pricing needs to go up, CFO[s] need to articulate the additional value that’s being delivered in association with that rise in price.”

In the months ahead, CFOs will have to deploy effective pricing strategies as consumer sentiment sours; it reached its low point for the year so far with the University of Michigan’s March reading.

“Gasoline prices have exerted the most immediate impact felt by consumers, though the magnitude of passthrough to other prices remains highly uncertain,” Joanne Hsu, director of U of M’s monthly consumer survey, said in a statement. “A broad swath of consumers across incomes, age, and political affiliation all reported declines in expectations for their personal finances, down 7.5% nationally.”