Any business will have to consider raising their prices eventually. There are many factors that create the need for raising prices. These are factors like inflation, costs associated with selling goods, price hikes in raw materials, shortages, and many more. Overhead costs in running a business never stay the same and rarely go down. Just this fact predicts that someday you will need to consider raising prices. But how should you go about this in order to not drive away your current customers and still keep a steady inflow of new customers? The simple answer is that you should go about raising prices carefully. Besides raising prices to cover increased overhead costs, here are some other considerations to make when doing this.
When your competitors are offering a product the same as yours but raising their prices then it might be time for an increase.
This is usually the case when you are selling a commodity where there are not many substitutes. In other words, the commodity is the same no matter where you buy it. The most prominent example of a commodity is gasoline. There isn’t much differentiation with gasoline other than additives and mixtures but gasoline is basically gasoline. If one station has to raise its prices, the others usually follow suit.
You may have to raise prices because you are too busy.
Oftentimes, a business will have such good service and fair prices that they get overwhelmed with orders. In other words, they get too busy which can have a detrimental effect on quality of service. By raising prices, the inflow of new customers decreases. A variation of this strategy is to allow prices to remain the same for current customers but raise them for new ones so as to maintain the current work level while slightly reducing new business.
Another reason for raising prices is because your product increased in quality.
Customers oftentimes will not have a problem paying a higher price if the quality improvement is obvious. Think of ways to demonstrate to your customers the value of your improved product. If you are increasing the price of your services, focus on what has been done to raise the level of service performed by your providers. For example, if you have a store that sells home improvement products, focus on how your sales staff now has to go through certification training in order to give technical assistance on installation. This way if you have to raise the prices on bathroom fixtures, you add value by having a certified sales staff person who can give sound advice on how to install them.
If you have to raise prices on existing customers, there are ways to soften it.
The best way to tone down a price increase is to add value to the product you are raising the price for. Some businesses offer coupons or add something free with a purchase. If the item you sell is something that your customers rely on heavily, they will probably object to a price increase. One way to soften this is to offer alternatives to the product they are accustomed to. This way, they can either pay the new price or downgrade to a lower-priced alternative. Whatever you do, don’t surprise your customers and don’t raise your prices without being ready to explain the justification for it. Most customers are fairly reasonable if you don’t surprise them and can present your case for a price increase with facts.