Raising prices: Why to do it, how to do it
The quickest way to make more money is to charge more. Find out why it’s good to raise your prices, and how to do it well.
While Aussies still have some concerns over the stability of their finances in the current economy, the fact is, the population has seen consistent increases in affluence and a steady drop in unemployment since 2009. Part of this rebounding is due to the stimulus package, since, in order to build a strong economy, money needs to keep changing hands.
Raising your prices supports the economy
The knee-jerk reaction that most people have in a financial crisis is to hold on tightly to whatever funds are still available. This can make them feel that they need to settle for bargains and spend less, and businesses may follow suit by maintaining or lowering prices in order to retain their customers.
The problem with this tactic is that it doesn’t encourage growth, and can contribute to labour deficiencies because of insufficient funds within the business.
In turn, the public struggles for employment, and the cycle feeds itself through this cause and effect.
You can do it
Contrary to your gut instinct, raising your prices will actually support the economy and allow further prosperity and rebounding through a greater amount of cash in circulation.
"There are ways of raising your price that will not only help you retain existing customers but to attract new ones."
You can attract new customers
You may feel wary about raising your prices since there is always the fear that you’ll lose customers. However, there are ways of doing it that will not only help you retain existing customers, but to even attract new ones.
Want more articles like this? Check out the pricing strategy section.
When you add value, you’re more likely to see an acceptance of your raised pricing. You can add value by adding products to a service or offering a business-based incentive like “store cash” (if you have a bricks and mortar store).
Regardless of what the bonus is, your customer will view it as an asset, and as a way of showing your appreciation. Your customer will make an intellectual connection about the price rise, and will be more comfortable with it.
Communication is key
Offer customers an explanation for the price increase. If you change the price for no apparent reason, they’ll possibly become more distrustful. It’s this lack of trust, rather than the price itself that is more likely to drive away business.
When communicating about the price rise, explain your value-added approach or the external factors that have led to the price rise, such as the world economy and/or third party costs. Giving an honest reason can generate trust and build loyalty rather than destroy it.
While a well-executed price rise will certainly benefit your bottom line and help the economy, it can also increase the positive perception of your business now and in the future.
What are your tips on raising prices?