every company wrestles with the question of how to increase prices without losing many of their customers. For small businesses, this issue can raise many problems, especially if their original strategy was to offer products or services free of charge or at incredibly low rates.
Unfortunately, it is almost certain that some customers will abandon a brand once they catch wind of a price increase. Price increases that are well executed, however, can help companies hold on to loyal customers and even gain new ones in the future.
Here’s how to boost your prices and keep your clients.
1. Target more affluent customers. Who is buying the product is an important factor when it comes to pricing a product. Different people often buy the same product or service at different prices because of who they are, rather than what the product is. For example, an ambitious mid-level executive might prefer to drink Starbucks coffee at work rather than a coffee from a less-regarded brand. Some people refuse to shop at stores like Walmart even though it likely carries the same brands they purchase elsewhere for considerably more money.
Another factor is life stage. For example, parents often spend more money on their first baby than on their second or third. Price is automatically separated furthest from product if you are selling to them while the couple is pregnant with or raising their first child compared to later children.
2. Become a leader in your field. Who is selling a product or service can makes a big difference to many customers. A seller's reputation, financial stability and leadership position in its market have been made more valuable as competitive assets than they were several years ago. Customers often prefer trendy, talked-about restaurants over others to the extent that the prices at those restaurants, and the prices at other restaurants, are sometimes made irrelevant. In the financial services sector, recent investment and banking fall-outs have caused a number of customers to seek out trustworthy institutions over those that only claim to be able to make the most money.
As a business owner, your goal should be to make your company the go-to authority in your industry or area.
3. Upgrade your venue. The importance of context when it comes to buying can't be underestimated. The difference in price between a face cream sold at a Walgreens Co. store and one sold in the home by Mary Kay, or at a cosmetic counter at higher-end stores such as Saks or Neiman Marcus, or at an exclusive Parisian boutique can be disproportionate to the difference in the product's ingredients. The price is governed by the expectations of the consumer largely based on where they are buying it, the brand and the expertise of the salesperson -- not the product.
Also consider changing presentation. A chiropractor, for instance, relocated from a small, messy office to a well-appointed professional office, and switched his attire from casual to conservative clothes. These two minor changes allowed him to increase his average fee from $2,000 to $5,000, with no change to the end product.
Strengthen your rapport with dedicated customers. Thank them for their business with complimentary services or products. After you implement your pricing increase, make sure you continue to provide your highest quality service or products to clients. Continuing to demonstrate your ability to solve their problems and provide what they ask should help to smooth over the initial impact of your increased rates