Increasing your prices can be tricky at any time, and in today’s age of internet shopping it is very easy for customers to shop around.
As a small business owner it is important to regularly review your prices, especially if there is a key event like:
- A product or service is not selling
- Your costs change
- You introduce a new product or service
- You introduce product enhancements
- Your competitors change their price or introduce a new product
Factors to consider
When setting or changing prices it is important to understand the following factors
- What are your competitors charging? If you are charging more, why, what differentiates your product or service?
- Offer multiple options – so have a basic product and then for additional fees customers can purchase add-ons.
- Understand your costs – there is no point in setting your price if you are going to make a loss on your product or service. Its ok to make a loss on a few products to get your customers in the door, but overall the aim of the game is to make a profit!
- Understand where your product is in the lifecycle – is it a new or premium product in high demand?
- Understand how much the customer is prepared to pay – do some market research. Are your target customers bargain hunters or premium shoppers?
Strategies for increasing your price
There is no one magic formula for increasing prices without upsetting customers. Unfortunately, a lot of customers are price driven. It is important to change your prices with care. Here are some things to think about when increasing prices:
- Increasing your prices by a little to test what works. Studies have shown that price increases of up to 5% have little to no impact on customer retention
- Let your customers know about the price rise and why. Don’t forget to update your website and your sales team!
- Promote the value of your product or service – your point of difference
- Test price increases on the client’s you don’t mind losing so much!
To calculate the impact of say a price increase or increase in the number of products you sell to each customer, use this interactive calculator: