Should you raise pries or take the hit of increased expenses? It is quite a balancing act, raise prices too high, customers don’t come back.
Take the hit and absorb the cost puts extra pressure on the bottom line and may force the business owner out of business.
Here are some steps to take to increase your prices without annoying your customers.
Timing
It is a good idea to raise prices when you have a good base of customers that like your product or service.
A good time to raise prices is every two years to keep up with inflation.
Give more
Consumers are more likely to pay more if they perceive they will get more for their money or something for “free”.
Like say a free car washes for a year if you buy X model car from Big Car Company Inc.
It will have to be something that will cost you nothing or very little cost to you but will have a higher perceived value to the consumer.
Reduce sizes
Fast f
ood restaurants do this a lot, where the existing prices are maintained while reducing the serving size.
Raise Prices or add fees
Instead of choosing to raise the prices on your product or service, you can add fees. Courier companies added a special fuel surcharge when gas prices were going through the roof.
This is a good strategy if you think your increase will be temporary. This fee can easily be removed when say the cost of gas goes down dramatically.
Bundle Products and Services
Soften the price increase pain by offering new bundles of products and services. Instead of offering say a burger, bundle it with fries and a pop while increasing the price.
The price increase is hidden in the bundle and consumers perceive it as a deal.
Choose a different target market
As a business owner it may sometimes be necessary to dramatically increase prices it is a good idea to go after a more affluent customer base.
Sasks Fifth Ave serves a different market than Walmart yet both sell clothing.
It’s never easy to increase prices, but with a little bit of planning, it can be done.
Mathew Jazenko is Principal at MRJ Financial Solutions and enjoyse helping business owners improve the bottom line. (289) 500-1978
