We are going through a tricky business and economic period. You might think that lowering your costs is the simplest way to entice clients to return. But, on the other hand, you might also consider upping your pricing to generate some much-needed money. If you go down the latter route, there’s a good chance you’ll be worried that this will be the final nail in your retail coffin, that your customers will quit you in favour of those other businesses providing cheap goods or services.
However, for a firm to remain profitable, You must frequently raise pricing; this may be your only alternative if your costs have risen.
Consider these highly pertinent pricing ideas raised by Leigh Cauldwell, behavioural economist and pricing specialist, in his book “The Psychology of Price” before delving into when you can raise prices without losing clients.
- The value should determine pricing to the consumer rather than your expense.
- Pricing should be visible so that your clients can know what they are getting for their money.
- Prices should be comparable – on terms that you have control over.
- If you want to adjust the pricing of a product or service, you must reframe it.
- Profit is primarily enabled by price differential.
- The customer’s impression of value is shaped through pricing communication.
- To boost profitability, you must be willing to lose some sales.
Raising pricing has risks, but there are ways to do it without losing clients; with the previous points in mind, here are a few helpful tips:
Add Greater Value
Customers are significantly more willing to pay a more excellent price if they believe they are getting something extra or an improvement. Therefore, justify a price rise by adding features or giving added value. Offering one year of free support on a new computer, for example, would be a value-added service. In addition, customers are often willing to spend more for a more dependable, efficient, and superior product.
The idea is to figure out how much your consumers are willing to spend so you can maximise your revenue by charging what they are willing to pay. They will not buy if your pricing does not represent the value.
Offset Price Increases with Strategic Discounts
When you boost your rates, you risk losing your most price-conscious customers. To avoid this, raise your prices while offering periodic discounts and bargains that bring costs back down to their original levels. Of course, your most economical clients will take advantage of these discounts, but the less price-conscious would probably ignore them, so you should still have plenty of customers paying the total price.
Appropriate discount pricing methods help dispel the notion that your products do not provide the same value as before: convey the concept of a limited price drop for a speedy response or as something that will only be accessible for a limited period.
Bundle Pricing
Have you thought of selling many things at a lower price than buyers would pay if they bought each item separately? This can assist in alleviating the sting of price rises. In addition, because the customer’s attention is focused on the price of the bundle rather than the unit price, they may not notice the price increase: the offer entices them.
Bundle pricing is an excellent tactic for businesses that can provide gift items. A candle manufacturer, for example, is now offering a Large candle with selected aromas and 3 for 2 on selected No. 7 goods (the cheapest being free). However, businesses that use this method must guarantee that they can afford to lose money on lower-value products while making a good profit on higher-value products.
Be Honest About Your Costs
Sometimes it’s simply necessary to raise your prices. If your expenses are rising, inform your clients; if you are spending more money on your items, explain the benefits of any more features. Before raising your pricing, be sure you’ve evaluated your existing costs and any predicted cost increases in the coming year or two.
When you raise your pricing, you are going to irritate some clients. Accept that you may have to explain your reasoning, but in the end, customers will pay what they believe a thing is worth. Remember that it’s not necessarily about the price rise itself but how you implement it.
You shouldn’t be too concerned if you provide decent value for money. However, if you believe that your pricing is a fair reflection of the cost and worth of your product, then instil this “mantra” throughout your firm.
It’s Your Turn.
When the time comes to raise your store’s prices, consider the several options accessible to you. Then, when adopting a price increase, think about which option will work best for your store and which techniques have worked in the past.
It’s difficult (if not impossible) to predict how each existing customer will react to a price change, let alone how new shoppers (the market) will respond.
You can, however, put each of these ideas to the test. This will increase your chances of avoiding an adverse reaction and increase your revenues.