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HOW TO INCREASE OUR PRICES?

NEXT ARTICLE:PRICE SKIMMING!

I am talking to you today about a topic that I am working on right now: price increases.

Whether it is because we had planned an increase for our business, because of an increase in our demand, changes in our market conditions, to stay ahead of the cost of living, or because of an increase in the cost of our raw material, we are often called upon to revise our prices.

Of course, the easiest way is to simply increase our prices. And the start of the year is often a good time to announce such an increase. However, by how much should the increase be?

To increase our prices, we need to go beyond our country's inflation rate. Normally, government authorities will give you these figures. I am in Canada, so the reference site is Bank of Canada. If the key indicators give us an inflation rate of 1.3%, increasing our prices by exactly that percentage is to keep them the same. If we want to increase your prices, doubling the inflation rate, up to 5%, can be done without much explanation. However, if we are in a very price-sensitive market, even this level of increase may need justification.

Beyond the above increase, and for price-sensitive markets, we will need to justify the increase. Depending on the reason, few or no clients might be unhappy. Success is often in the presentation, the timing, and the execution of the increase. You can even use this to boost sales by having a "take advantage of the old price until XXX" promotion.

Another way to make this increase easier on our clients is to do it regularly. The increase becomes expected.

But is this the only way to increase prices? No. There are several others. Here are a few :

  • Make a change in the quantities. Do you sell 350 ml containers? If possible, switch to other formats and take advantage of this change to adjust the price up. Same thing if you sell in a packaged way, for example, ballpoint pens. If they were selling in a pack of 5 pens for $ 3.99, switch to a 3-pack of pens for $ 2.99. As a result, the price just went up.
  • Change to our products/services. We can package our offers differently. For example, if we are selling individual items, we could bundle products and services into an attractive "package" for our customers. And the price could be increased. A more specific example: offer your webinars with unlimited access to the online version of the course. This bundle can be sold for more than webinars alone. Or, combine a photo shoot with the services of a stylist by offering an all-inclusive price. Do you operate a bicycle store? It is common for customers to buy helmets, lights, and a padlock. Why not do a package? Also, you can offer a type of "extended warranty" that offers certain benefits, such as maintenance after a certain time. You can also add additional services to your offers, such as order preparation or delivery. I do my grocery shopping online and not all grocers charge for order preparation. All charge for delivery, but prices may differ from grocer to grocer. This is one way to increase your price.
  • Time for a change? Are you redesigning your website? Is your spring collection coming? Are you expanding? Are you moving to a new location? Will you have more parking spaces? All these reasons are good to introduce a price increase. For new products/collections, that goes without saying. But a reorganization of your products in-store may also be necessary. Jeans that cost $ 29.95 last fall may well sell for $ 34.95 this spring. To help with this increase, many stores will place the product next to other more expensive products. If your $ 29.95 jeans were next to $ 15 t-shirts, then the $ 34.95 jeans next to those same t-shirts might reveal your price increase. But if you put it next to $ 49.95 shirts, then the increase might not be so evident. The same thing works for the website. Take advantage of a redesign of your ergonomics to change the products and prices around. This could help make the increase go better.
  • Change your payment method. Several companies use this strategy. Car dealerships are perhaps the best example. They went from having a price for different options for a model to a financing price to a residual value lease to monthly payments, then biweekly, then weekly. Online software companies also offer a simpler version of this: an amount 'X' if you pay for the whole year now or 12 'Y' payments that end up being higher than 'X'. Certainly, there is a risk in having a monthly payment plan, but this is one way and one reason to increase your prices.
  • Do some of these strategies fall under "drip pricing"? In my opinion, having addons is not a problem. The problem is with the transparency on these additions. If a customer wants to buy our product or service and they learn as they go through the buying process how much it will cost them, this is a problem. The price of goods/services should be clear from the start. And if this is not possible (for example, the cost of delivery may change depending on the distance), be clear. The customer does not want to start ordering a new house based on a price 'X' and then learn that there are extras for doors, windows, finishing materials, etc. But to say: the 'X' model house costs a set amount. And if you want a fireplace, add 'Y'. A second bathroom, add 'Z', brick on all four exterior walls, another addition. This is not a problem in my opinion. We did not trick a customer by promoting an extremely attractive price and subsequently make the final price for what they initially wanted to be higher than the one displayed.

    If you want to adopt this strategy, check with an expert/lawyer/government agency who can tell you if your pricing policy complies with the rules in place. The few dollars invested will give you peace of mind.

    If you have any questions or comments, please do not hesitate in contacting me.

     

    Stéphane Elmaleh-Riel, B.Ed., MBA
    Marketing consultant