A business owner once told a friend over dinner that he had a beautiful recurring dream. He opens his shop on a Monday morning, and smiling customer after smiling customer start coming in and paying double for everything. But raising prices isn’t a dream at all. Increasing prices is a must for every single business.
So why doesn’t he just double his prices in real life? A price increase has another potential effect that definitely isn’t a beautiful dream. It could wipe the smiles off customers’ faces and mean less customers buying. This is a valid concern, but the risk can be greatly reduced by planning a price increase intelligently.
Businesses are constantly facing higher business costs. Labour rates, inflation, the need for strategic change, fluctuating industry trends, and a multitude of other factors that makes increasing prices an absolute must for survival.
Without increasing prices, your profit margin erodes as costs increase over time. So you should be reviewing your pricing strategy every six months.
So if raising prices has become a must for your business, follow these tips that keep both you and your smiling customer walking through your doors every morning. Do it right and you’ll increase profits and maintain or even grow customer satisfaction.
10 tips for increasing prices without annoying your customers:
1. Get the timing right
If you’re not exactly sure your product or service is perfect or that your customers are satisfied, that’s not the time to crank up a price increase. So plan ahead, and make sure there are big smiles on customers’ faces in the days and weeks before that strategic price increase.
2. Offer a bonus
A really great way to go about increasing prices is to bundle a little something extra with that bigger number on the ticket. Just make sure that free gift wrapping is not going to gobble up the extra money you make from raising prices.
3. Shrink the product
One way to do a price increase without even doing a price increase is to shrink the product instead and make more money that way. Just make sure your burgers aren’t shrinking at the same rate that McDonald’s are.
4. Shake up the product
If your $100 product normally comes in a 10-pack, here’s a great way to think about raising prices — introduce a new 5-pack and charge $60. Some customers will love the convenience of a smaller pack that actually costs them less. But you’ll make more! It also improves the perceived value of the larger 10 pack.
5. Raise fees, not prices
If increasing prices on your actual service or product are not something you want to consider, why not increase the fees by a small margin instead?
6. Improve the product
If your price increase coincides with something new, cool and improved in the related good or service, your customers may not mind paying a little extra for something that is a lot better.
7. Offer deals, discounts and bundles
Let’s face it: your customers aren’t going to love the fact that you’re raising prices. So make sure you introduce a couple of sales, deals and discounts at around the same time, and also think about bundling a couple of products or services together at an attractive price.
8. Change the target
If things really aren’t working in your existing market, you could try something dramatic: do a considerable price increase, but target your product at a whole new and more affluent customer base.
9. Flag and explain price increases
If you make your policy for raising prices clear, moderate and regular, and you are open with your customers about why it’s happening, your customers will come to expect and understand them rather than punish you for them.
10. Make a plan
Like absolutely everything in your business, you need to think about raising your prices very carefully before ploughing ahead and putting a number after the dollar sign. You can bet Starbucks and Netflix did before raising their prices! And then, when it’s time for a price rise, ensure you’ve crunched your numbers thoroughly and justified your decision meticulously. Your customers will not appreciate a cynical cash-grab that was too greedy or yet another round of increasing prices a few months down the line.
Ah, if only raising prices was as easy as that business owner’s dream! But while the reality of increasing prices is a little more difficult, the boost to your bottom line can be well worth it. Best of luck!