Guest blog by Dennis Bridges, MBA
In the last number of weeks I’ve have had a discussion about pricing with a few of business owners and the general consensus is be that this is a difficult time to be raising prices. However, some companies have gone so long without raising prices that their margins are approaching zero and “the juice isn’t worth the squeeze”. The question is, “How can you get more juice per squeeze?”
“Higher or lower”, as Bob would say, do you increase the price or lower the value provided? I’m of the mind that generally people are willing to pay a bit more for something than to pay the same for less. Given this philosophy how can we go about increasing prices without damaging our business?
First, before you raise your prices make sure in the eyes of your customers you’re doing a little extra. It could be as simple as calling customers by name, adding a couple more fries to each plate or staying open an extra half an hour. That being said, try to think of ways to add value for customers that won’t cause you or your team to burnout.
Second, set prices with confidence; don’t assume customers will be offended. The sandwich shop I frequent for lunch just raised the cost of its lunch combo by a dollar and I didn’t bat an eye. The owner told me that things haven’t slowed down because people weren’t coming for the low prices; they were coming because it was a great value and that is still the case. Don’t be afraid to include costs and a healthy profit margin in your prices, as it will ensure that you won’t need to constantly increase them or limit your offering, and customers appreciate that a business needs to make a profit.
Thirdly, before raising your pricing structure consider “altering” it. For example, incorporate a setup or preparation fee rather than increasing your hourly rate. The purpose here would not be to confuse people but to better communicate the value of your offering. Thus changes should be well thought out and relevant.
Finally if you are going to increase your prices or change your pricing structure make absolutely sure you and your staff are well practiced at explaining the change and the motivation behind it when necessary. If you and your team believe in the value of your offering others will follow and keep coming back.
We would love to hear your comments on this topic. Post a comment below….