As consumers, many of us become unhappy if prices increase. Thus, we like discounted prices much more than higher ones. Last week, we asked “Do We ALL Want a Deal?” Today, we take a more company-oriented view. And we focus on a sensitive topic – raising prices. What should firms accomplish to successfully raise prices?
So, is there any way for firms to raise prices without upsetting shoppers?
For this post, our guest blogger is Jessica Leone, B2B Content Marketing Manager at Valpak.
A Company-Oriented View to a Sensitive Topic – Raising Prices
Depending on your market and industry, there are many factors involved in having to raise your prices. Whether the reason for a price increase is cost inflation, anticipatory pricing, or over demand, you should have a strategic plan behind how and when you raise your rates.
To grow your business means to expand your customer base and improve your customer lifetime value, both of which involve your price as the main factor. It’s a necessary step in order to evolve as a business and become more profitable. Raising your rates is also a great opportunity to justify the price hike by improving the value of your services and products for your customers.
For specific examples of how to raise your prices, check out the infographic below by Valpak. They offer twelve steps to raise your prices with added tips on how to best communicate the increase to your clients. You may find that raising your prices isn’t as daunting or complicated as it has to be.
Dear readers, what do think think about these tips? As a shopper? And as a company marketer?
Increased prices are psychologically a funny thing. Obviously, if you raise prices, demand will decrease, but many actually need there to be a higher price in front of them to justify that their purchase was “one-of-a-kind” or “superior” compared to the purchases and goods of their peers. A funny example of this are trading cards. All of them basically cost the same to be made and purchased randomly in card packs, but one card in a may have a metallic foil and may be printed much less then all other cards, so in the free market people will charge high prices to express that their card is the real deal. Price can equal validity.
I think it is very hard to keep consumers happy in times of anticipated inflation. I agree with the article when it said, “to grow your business means to expand your customer base and improve your customer lifetime value”. If you do not expand your customer base to fit more people and their likes your business comes to a halt. Also if you do not try to constantly improve your product, your lifeline for the company will eventually begin to decrease.
Keeping consumers happy is a nearly impossible task. Companies tend to hear about the bad in their business rather than the good. So obviously when prices rise they will get complaints. But training employees to deal with these types of situations is a very important skill set and great way to keep clients.
Raising prices may sometimes create the illusion of a more luxe brand but that does not apply for every product or service out there. For most businesses, raising prices makes customers upset and decreases demand for the product. If a business was going to try to raise prices the minimum wage needs to increase drastically, with the current rate it would make it more difficult for consumers to purchase the product. If the business is trying to alter the target market and focus on becoming a more high end brand then increasing prices may be the right path for them. Overall, for the average business raising prices will most likely cause demand to decrease.
Raising prices and still keeping customers 100% satisfied is impossible. However, sometimes prices need to be raised and it’s not a necessarily bad thing. Raising prices can help the product seem more valuable.
I believe the ethics behind raising prices is a very interesting topic. For some companies they use the marketing strategy of having a “Premium Product” to up charge consumers. Many times this is only so the customer can own a specific name or brand which is a status symbol. The ethics behind this marketing strategy because many companies will use the premium market to sell products which are the same or similar quality then other products on the market. This in a sense is a dishonor to the consumer.
Raising prices while keeping customers happy is not an easy task. Sometimes prices need to be raised, and it can become more beneficial for the consumers in the long run. Eventually they are going to have to be raised, so they should ease into it for their consumers. It can be a huge hit or miss for a company and their customers.
Nobody wants to pay more for a product then they need to. When prices rise many customers get dissatisfied with a product, but sometimes a company has to raise the prices. It is almost impossible for a company to raise prices and keep 100% of your customers satisfied. Some customers like higher prices because it makes them believe that they are getting a better, premium product.
It is extremely difficult to keep customers happy while raising your prices. if you raise prices, the loyal customers may be upset but they will get over it and continue to keep buying the product. There may be customers that you risk losing, so marketing your product to make it seem even better and a higher quality to make it seem like an overall better and more valuable product would be one of the ways to keep people happier and lose the least amount of customers. No matter what, 100% customer satisfaction will never be possible, people will always find a reason to complain. If people want your product to improve and be better, they should expect that the price has to increase with that.
Raising prices is something the consumer will mind or does not mind. One mindset might be that the raised price makes the product in question unique. Many users do not even notice raised prices. For example, Starbuck’s drinker’s who constantly purchase their drinks will not might or notice a slight increase in their prices. But one in a time Starbuck’s drinker’s might not enjoy the already increased prices and may not like it even more if they decide to increase their prices even more.
I think many companies probably find raising prices intimidating. However, this chart really did breakdown simple and effective steps for raising prices in a business. I think that if I was a small business owner I would definitely feel comforted knowing that there are ways to raise prices without losing customers.