Increasing and decreasing prices can be nerve-wracking, especially if your business is doing well as it is. It’s impossible to know how the market and your clients will respond to a price change. There are things you can do to make this business decision more palatable and acceptable to your market place.
Read our top tips for how to confidently handle changing your prices.
Make sure you have a clear business reason for raising your prices. If you are looking solely to increase your profit-margins, first check whether there is any way you can reduce your costs instead. Just make sure that any cost reductions won’t impact on the quality of your product or service delivery.
So, by how much do you need to increase your prices? And will this be an incremental (eg an annual increase based on inflation) or a step increase?
- If it is incremental, then it’s enough to simply inform the client or customer of the increase. Be sure to reassure them of your dedication to quality and provide a channel for them to give feedback and suggestions for improvement if appropriate.
- If it is a step increase, make sure you can adequately justify the increase in the eyes of your customer. Customers will naturally ask (if not to you then to themselves at least) why the increase has been made and it is important to reassure them that they are still getting value for money. Can you add more value to your product or service to justify the increase? For example, could you add a customer-only space on your website with useful content, video tutorials, support information, or other resources?
Timing can be important when increasing prices, so make sure you choose a time when you’ll encounter least resistance. This will depend on your market and business’s seasonality but, unfortunately, there may be no “good time”.
A change in positioning strategy, or in the competitor landscape of your market, may mean you want to reduce your prices.
As with increasing prices, make sure you have a clear business reason for the change.
- What do you want to achieve?
- Are you looking for short-term gain (eg getting rid of end-of-line stock or getting a quick foot-hold in a new or changing market)?
- Or do you want to establish a long-term “competitively priced” reputation?
Whether your price reduction is going to be temporary or permanent will affect the price you choose and how you promote it.
Long-term price cuts are essentially about value reputation, so make sure that the rest of your marketing reflects this positioning strategy so that there isn’t a disconnect.
Changing prices and positioning
Since pricing and positioning go hand-in-hand, it is essential that you consider the impact that any price change will have on your positioning strategy and, in turn, the rest of your marketing.
This might involve a strategic review of your marketing and how you approach your market place as a whole.
Remember, pricing is a core marketing fundamental. Your prices tell your market place a lot about your company’s market position, its value proposition and what customers can expect from you. Any changes to price need to be considered within your marketing as a whole, not just in the accounting books.
By Rosalind Conkie, a Marketing Consultant at KMS Marketing.
Please contact us to discuss how we can help you review your marketing to ensure it is helping your business deliver long-term sustainable results.