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After living in Mexico for a few years, where prices increase two to three times a year, it was interesting to return to Canada and see the relative stability of our prices. Why do we have a relative stability with our prices? Because of our low inflation rate, a very strong competitive environment and an ever-increasing demand for productivity that affects companies’ profitability often more significantly than an increase in price would do.

That being said, there are several occasions where an increase in price can be justified. Here are some examples.

If you are in the service industry, and do not want to increase your operational capacity, or if your waiting list is two to three weeks long, you can use the price function to modulate the demand for your services. You might also want to focus on certain types of high margin customers, and limit customers who come for quick tips that take time but do not bring much in terms of profitability.

Another situation, always in the service industry, is when a professional receives a certain certification, an academic achievement, or simply has a certain longevity (10th anniversary for example), there may be a price adjustment for those landmarks. Another justification may be moving into a bigger, better adapted place, etc ...

In terms of products; you may receive an exclusive good, in limited quantity. So the price can be adjusted accordingly. This situation is rare and can lead to a bidding war if the product is valued. You can use demand based pricing which is explained in this article. There is a general economic upturn in your market and the finances of your customers are doing better; this is another opportunity to increase prices.

A factor to consider is when none of the possibilities listed above apply to your company, and that your prices have stagnated for years. Without an increase in price, if you are in an inflationary market, then your margins will go down. What can you do? One way to get around this is to re-package your products and services so that an increase is concealed in a new way of billing. An example is if you have a training company. Initially, you can charge per group, then you can move to individual billing. This change may include an increase in your prices. You can also move from "charging for your product" to a subscription model (Adobe software made this change by making software available in the "Cloud").

Another way to increase prices/revenue is to revise your customer's transformation process (or the value creation chain for the customer). It is important to understand this process and to see the added value you bring to it. An excellent example is your dentist. When you go for an annual check up, this includes a cleaning. At the beginning, the assistant will help you fill in the necessary information. The cleaning part is done by a dental hygienist, who charges a lower hourly rate for the services offered, and once the cleaning is done and the X-rays taken, the dentist can come to check the work and make the recommendations based on the observations he/she has made. In an appointment of roughly 45 minutes, about 10 minutes are spent with the dentist and the rest are spent with the assistant and the hygienist. When understanding this, your appointments can be programmed accordingly and your prices can remain constant for the customer, but your profitability will increase because of better management of your added value in the process, and a maximization of your time. Lawyers and accountants work in similar fashion.

Although there are several reasons to increase your prices, some are not valid. One of these is when you want to increase your prices because that is what your competitors charge, or that is what you believe you should be earning because of your studies or background, etc… In these circumstances, a simple price increase can have a negative impact on your sales pipeline. If your competitors charge more, you have to understand why. Have they been there longer than you? Do they have more associates than you? Do they have more experience than you? Do they offer products/services that are different from yours (presentation, financing, accessibility, etc ...)? Are they really in your geographic market? In short, several questions must be answered before announcing a simple price increase. There is surely a justification for the difference in price and if you do not understand and address it, you risk seeing customers go to your competitors.

If you have any questions or comments, do not hesitate.


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

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