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Don’t make this inflation mistake

Inflation. It’s in the news, and it’s in your group chats.

The last time inflation was this high, most members weren’t even born yet.

But even though we’re not economists, we regularly see one big mistake in how news outlets comment on inflation… and it’s a mistake we’ve made ourselves, too.

So that’s why we’re writing this quick insight.

We want to clarify something that, while basic, is not always clear when you read reports around the topic:

First, inflation is a result. News outlets often treat it like a cause. But inflation doesn’t cause prices to rise… things like increases in production costs do.

Second, inflation measures how much prices went up over a given time period.

So when you see increased sales in Q3 or Q4, especially for big companies like Amazon, Walmart, Shopify, or Google, it begs the question:

Did they sell more merchandise… or did prices just go up in line with the inflation rate of their product category?

Here’s why this matters for the marketing and advertising industry: Selling the same number of products or fewer for higher prices can seem like growth.

But that doesn’t mean there’s a healthy and organic increase in demand and long-term growth.

Instead, it could mean that they’ve raised their prices to adjust for inflation, for example.

Basically what we’re saying is, don’t get fooled by one result or one metric without understanding the context around it.

And certainly don’t make the mistake of saying “it’s because of inflation that prices go up.”

Understanding this will help you make smarter marketing decisions… and help you avoid cutting or investing in the very things that could hurt your brand or business.