This is the truth. If you are in business or selling something, you will need to raise your prices during the life cycle of your product.
And you got one dozen reasons to raise the prices. There is recession, cost of goods has gone up, labor has gone up or competition has increased prices.
What can you do? Damn it.
But, your customers won’t like it. Some will reduce their purchases; some will desert you for your competitor. And there is a good chance that most of them will hate it.
How can you get the increase you want without incurring the wrath of existing customers?
Whatever the reason, there’s a right way and a wrong way to raise your prices. There are some basic fundamental rules to accomplish your goal without losing or upsetting your clientele.
Here are the 10 tips
1. Time it Well
Never increase your prices, when your sales are going down. Instead of recovering your loss, your left over sale may also hit a roadblock.
The best time to raise prices is when you’re sure that your customers are satisfied with your product or service.
2. Add Extras Privileges
But, How about charging extra for special privileges? Access to a customer help-line that skips the on-hold queue or upgrades on shipping turn around time or Free Shipping can reduce the pain of Price increase.
Today, one of the most valuable assets for most people is time. If you can save your customers time, they often will gladly pay extra.
Can you throw something extra in with your current product or service that would cost you little or nothing but would have higher perceived value to the customer.
For instance, you could offer free gift wrapping or extra product with increased price.
3. You Can Reduce Sizes
Most of the Restaurants use this tactic—keeping price points the same but reducing serving sizes slightly so customers don’t notice. You can do this for almost any retail product, from packaged foods to even services.
However, if customers do notice, this tactic can have negative reaction. If you’re worried that this may backfire, try to reduce the quantity or sizes gradually.
4. Try Number Games
The same pricing principle can also work for non-food items.
For instance, if you normally sell a 10-pack of premium candies for Rs 100 but you need to raise the prices by 10 %, you can create different-sized packages, which will make the increased price of Rs 110 very attractive.
You can make smaller packs of 3 or 6 candies and price then at Rs 35 and Rs 70 respectively. In comparison, Price of Rs 110 will appear reasonable and attractive and will sound like a deal.
5. Improvements Are Always Welcome
Customers are more willing to accept a price increase if you can show some improvement in your product- like better quality, new ambience, better packaging etc. In past, if your customers have been happy with your product, it is likely that small price revisions will matter to most of them and you will be able to justify the price increase.
6. Offer Discounts For A Short Period
When you raise prices, you may lose very price-conscious customers. To keep some of them, raise your prices, but offer short term discounts and deals that bring prices down to their original levels.
While customers, who are very price-conscious, will use these discounts, less frugal customers probably won’t bother, so you’ll still get plenty of people paying full price, while keeping your bargain shoppers also happy.
7. Bundle Products or Services
If you are increasing prices and you do not want your regular customers to feel the pain, you can bundle the products or services to give something extra.
For example, if you are running a beauty salon, you can soften the pain of price increases by offering new bundle of services, where you can add pedicure or foot massage services along with hair colour treatment.
This way customers always feel that they are getting a better deal in spite of you increasing the price.
8. Target a Different Customer Base
I have a doctor friend who was not able to increase his consulting fee for years. Whenever he tried to increase his fee, he lost his customer base and he had to revert back to his original fee.
We suggested him to change his clinic address, address a new customer base and increase his fee. He was able to charge 30 % more fee and his overall customer base actually increased with additional revenue.
If you need to raise prices drastically, you may need to go after a new, more affluent customer base. Even if your price increase is modest, expanding your target market a bit to more upscale customers or businesses with bigger budgets can be a smart way to offset the customers you may lose.
9. Be Prepared in Case it Backfires
You can’t make everybody happy and you need to increase your prices due to many reasons. Sure enough, some of your customers will be unhappy. Kindly ensure that your key customers (top 20 % who give you 80 % revenue) are explained the reasons for the price increase. If you are in a service business, you can write a personal letter or even speak to them on phone to explain. Most of the time your key customers will understand and you will not face any backlash.
10. Plan Ahead
Increasing prices is a sensitive issue and you need to plan ahead. You must consider the cost involved and take into account the future cost escalations in your product or operational cost. Customers will not take it kindly if you increase your prices very frequently. So plan for next one year at least.
A smart and timely price increase can make a huge difference to your bottom-line and your future income
About the author: Hemant is the Founder & CEO of branding and marketing firm ”Neeti Brand Accelerator” in Mumbai. He is a brand strategist and has worked with more than 150 brands during last two decades. He is also mentor and coach to SMEs and startups. You can visit the website www.www.neeti.biz. You can contact him at email@example.com