Raising Prices
How can you get your customers to accept a price increase, or even use a price increase to get new customers?
Your costs are going up, and you need to raise your prices. But how will your customers react to a price increase? If your market is price-sensitive, you may lose business to competitors, or buyers may purchase less frequently than in the past. However, it is also possible that a price increase will bring you new customers.
You might find that your customers understand that costs are going up and take a price increase in stride. However, if you believe your market will be resistant, here are some strategies you can use:
Educate your customers. Without apology or getting defensive, let customers know that your costs are going up and increasing your prices is necessary to maintain the high quality and service they expect from you. Remind them of the benefits they receive from your products and services. Chances are they buy from you because they value the results they get from your products and services.
Add value. Can you increase the perceived value of your product or service without significantly increasing your cost? What would it cost to extend your guarantee or warranty period? Consider offering a free mini-consultation. One seminar promoter charged prices higher than his competitors for seminars by including a free 20 minute phone consultation for attendees. Many people came to the seminar (and paid the premium price) because of the free offer, although only about 10% of them actually took advantage of the consultation.
Offer options. Help purchasers get what they want and are willing to pay for by packaging your products and services in various ways. They only have to pay for what they want and need.
Get customer commitment. Announce the price increase, but offer the current pricing for orders made by a certain date. Or, give them the current pricing through a future date to those who commit to a contract or pre-pay.
Now, about those new customers . . . It may be that your current prices are too low and do not accurately reflect the value you provide. One of my clients was a consultant who sold manuals about running a training business. I suggested that she make changes to the packaging, add a few features, and double the prices to more accurately reflect what the information was worth. Although she was skeptical, she tried it. To her surprise, not only did more people buy the manuals, customers bought several items instead of just one. The new packaging and higher price attracted the right buyers.
A price increase will attract customers who place a high value on the benefits of the products and services you offer. These buyers may also be more sophisticated or experienced and require less support. One company learned this the hard way when they lowered the price on a software package. The bargain pricing not only reduced their revenue per sale, it increased their support costs as the new users required more hand-holding to get the package installed.
Make your prices reflect the value your customers receive, and you will maximize your revenues and profits.
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