Can you double your price and not lose half of your customers? Though studies show that over eighty percent of respondents are skeptical, in actuality, the answer should be yes much more than you’d expect.
Many companies find themselves in need of raising their prices. Such pressure often originates from increased energy or raw material costs, but sometimes it comes from simply taking a hard look at the books and realizing that you need to get more for what you are selling. But once you’ve reached the conclusion that you need to raise prices you’ve surely arrived at the point of dread: telling your customers. What will they say? You imagine they’ll be angry…they’ll drop us for a cheaper supplier…the sky is falling and the end of the world is near.
However, if you’re feeling these pains they are probably from a self-inflicted wound that’s probably been festering for some time. A wound that takes one of two forms: selling on price rather than value; or, pricing your product and service as a commodity rather than a solution.
Since every company will want to raise prices at some point, now would be a good time to take a look inside to see what it is that you are really selling. This refers to the intangibles that go beyond product and price. For example, a good jeweler doesn’t merely sell gold, silver and precious stones. He sells, “Wow, your husband must really love you. ” A savvy plastic surgeon sells youth, not rhinoplasty, and a university sells a brighter future, not classes or diplomas. Every company that has been in business for enough time to have repeat customers has products or services that are worth more to the customer than price alone. This intrinsic quality is called value.
Sometimes we need to look deeper to determine exactly what this value is. Who better to ask than our customers, since they often see this value more clearly. Other times you may find it useful to ask an outside professional to make this evaluation. And since products and markets are always changing, it’s a good policy to engage in these methods on a regular basis. This exercise will give you the information you need to continue providing value at your current rate and it will enable you to uncover the secrets to increasing it even more.
Once our value is discovered and a process is put in place to maintain it in the marketplace, it’s our duty to continuously communicate it to our customers and potential customers. Take the time to ask your customers if they’re happy with their purchase (that is, do they find value in it). It’s also wise to let our customers realize that they are a part of a relationship that brings this product or service to them and that this relationship in itself has value.
Now that we have our arms around the concept of value and have committed to impart this to our customers, it’s time to consider how to communicate a price increase. The fact remains that although nobody wants to pay more for anything, the reality of life is that occasionally you have to do it. While you ruminate over how to announce a price increase, take comfort in knowing that people dislike changing from a trusted business partner to an unknown supplier as much as they dislike paying more. Those intangibles like trust, reliability, personal service and loyalty go a long way. If you have spent your time communicating value and can clearly show your customers how a price increase is necessary to maintain or increase this value, you should not find a great resistance from them. True, you may lose a customer or two, but experience has shown that those who buy on price aren’t necessarily the customers worth having, and those that leave at the first hint of a price increase were probably looking for an excuse to defect anyway.
In summary, find your value, make a practice of communicating it, and raise your prices to the point where your profit – not the number of customers – is greatest. You’ll be happy you did.
Gaetan Giannini is the Department Chair and Assistant Professor at Cedar Crest College in Allenown, Pa. He is also an independent, marketing speaker and consultant. He can be reached at 610-606-4666 x 3427 or firstname.lastname@example.org