$20 is an outrageous amount of money. I pay just $19.99. This is as hilarious as it is true. Pricing a product/service right is immensely important to a business. And prices can never remain constant – It will always go up. No matter how long term your pricing strategy is, one day, you will have to evolve along with the market when you need to achieve your revenue goals or to keep up with rising costs of supplies.
If your operating costs are going up - You need to raise your prices.
When your prices are reflecting less than the quality of services you provide – You need to raise your prices.
You need more resources (people, office space, equipment etc.) to fulfill your ever-increasing orders? – You need to raise your prices.
When you are doing so well and overloaded with orders that you need to turn away customers – You need to raise your prices.
If your government starts levitating your taxes and since you can’t do nothing about it – You definitely need to raise your prices.
It is great to be competitive and provide an attractive pricing structure to your customers. When you know that the value you bring to the table is immense and it deserves more than what it is getting, it is high time you increase your prices. As the great Warren Buffet puts it, Price is what you pay. Value is what you get. If customers see value in your products or services, they wouldn’t mind spending some more.
When you think way ahead in time and implement all the right strategies, you can be more than successful in raising your prices without losing any customers. A Boston based tech firm – Appcues, had to make amends in their pricing structure and not only were they successful in keeping their customers, their strategy helped them increase their sales by 263% that month! So here’s what they did –
- Segmented their customers – into existing customers, current prospects and free trail-ers. Sent out targeted emails to each segment giving them a well-in-advance notice of the price flair and an honest reason on why they deserve more.
- Kept current customers happy – they let their current customers keep their existing plans for the same price, however, if they need to change their plan – it will come with the new pricing structure.
- Inspired urgency in sales – for prospective customers and/or free trial-ers, they sent them emails mentioning that there has been an increase in pricing BUT they can STILL have the same old pricing structure if they BUY within a certain date. This urgency accelerated prospects decision in buying ASAP and increased their sales big time.
- Followed up with customers personally - which helped in a giving a personal touch without pissing them off.
Five more strategies you should implement
#1. Take your time and give them some time
It takes time to plan and develop the right communication strategy to make that upward switch in your pricing. If you’re not sure your customers will see the true-worth of your product/services with the increased price structure, take your time to proving your worth.
Don’t shock your customers by informing them suddenly about the change. Let them know and get prepared well in advance so they can plan their further actions as well.
#2. Give them some value-adds
Any GAP jeans lovers here? Did you know GAP has a ‘Limited Edition’ section where they sell premium quality jeans and it costs about $40 more than their regulars? So what they did was they added more value to their jeans and most people do not mind spending higher on a premium product. By making a few changes / improvements to your product / service, you can add some extras and can justify your price rise.
#3. A good explanation
Let customers know why you are increasing your price. And be honest. If you’re increasing your prices because you are moving with the market or providing more value than the price offered or any other reason, say it and say it right. Show them what exactly their extra money is going towards in a detailed break-down structure. Customers will inevitably understand that you are competitive and staying on top of the market by trying to provide them with the best you can.
#4. Take small steps
Consumers don’t like to be surprised with a huge price increase even if they see value in it. Research has shown that when companies make sudden large raises in their pricing structure, they have lost a big chunk of customers. For example if your product costs $50 now and you want to increase it to $90, do it over a period of a year. Gradually increase it to $70 for 6 months and then to $90.
#5. Target your audience
Your price increase might make you lose some price-conscious customers who are not willing to pay even for added values. You cannot keep everyone happy but you can try to retain some of them by offering them some discounts or lower prices for short periods of time. A good marketing strategy in place should help your products stand out to the higher-spending bracket of customers. Retain your existing customers by offering them the same prices for their current plans. Offer a lower priced option as well but make sure you clearly mention what values they will be losing with a cheaper price.