Raising Prices and Influencing People
When your business was just beginning, you evaluated the market for your offerings and set your prices accordingly. Now that you’ve invested your energy and talents for a period of time, it’s no longer a new business, but a growing enterprise. Your initial pricing has most likely become outdated. It’s time to step back and re-assess your pricing model, adjusting your rates according to the business you’re running today.
Why is important to keep your business’ pricing updated?
It’s important to note that raising prices responsibly and for valid reasons is not the same as gouging your customers. You’re actually doing your business a disservice if you don’t periodically reassess and adjust your pricing. Keeping your prices stagnant for too long indicates a level of apathy that isn’t conducive to your company’s profits or to its perception by consumers as a successful business. Demonstrate that you’re a force in the marketplace by keeping your prices current and competitive. It’s a subtle, yet powerful form of marketing.
In addition to maintaining pricing that compensates you adequately for your efforts, updating your rates helps you avoid underselling yourself, especially as you grow in experience and reputation. While price is an issue that consumers take into consideration, they generally will pay for the quality products and services they want and need with greater focus on satisfaction and less on cost.
When you should consider raising your business’ prices?
When your operational costs go up
You have to make a profit. If you can’t cut material or labor costs, you need to raise your prices in order to protect your bottom line. If you provide a high quality product or service, your reputation will precede you, predisposing your customer base to see a higher price as fair and willing to pay it.
When you offer more
A more seasoned professional’s experience is worth more than that offered by a newcomer. Likewise, additional education, skills, or accreditation conveys a higher level of competence to your customers, for which they’re willing to pay. If you produce a product, upping the quality of ingredients or materials used, provides a product with a higher value to customers, for which they’ll accept a higher price tag.
When the value of what you offer increases
In the event your product or service becomes scarce or more specialized, its value increases. If your competition goes out of business or moves to a far-flung location, you may find yourself the only game in town. Consumers will abide higher prices in order to avoid having to travel a great distance for the same or something similar. A highly-specialized product or service will also be able to bring in a higher price than that which is run-of-the-mill.
When you switch to an “a la carte” presentation of products or services
If you’ve determined that offering individual parts rather than - or in addition to - “bundles” serves your customers’ needs better, it is appropriate to price those individual pieces higher than when they’re sold in conjunction with others. Pricing elements individually enables you to make more while simultaneously offering greater choice to your customers.
To assign greater value
A tried-and-true selling strategy is to actually raise the price of that which is not selling well. While this practice initially sounds counterproductive, the logic behind it makes sense. When a product or service is priced “too cheaply” it gives the impression that it’s intrinsically not worth much anyway. By raising its price, you assign it a greater perceived value in the mind of the consumer, which often stimulates sales of an under-performing product or service.
In response to feedback
Listen to and heed what you hear from customers. While you certainly don’t want to gain a reputation as being unrealistically expensive, take particular note of comments about how “affordable” you are. Feedback like this indicates that you could probably stand to bump up pricing a bit without alienating existing customers or discouraging new ones. Attempt to be competitively-priced while generating the greatest possible cash flow.
Your business is a living entity that should be responsive to the marketplace as well as consumer demands. When it provides quality products and/or services, it is entitled to experience significant success and financial gains; keeping your business’ pricing fresh and updated can help make that happen.
Have you updated your business’ pricing model recently?