The Secrets to raising your prices without losing customers (Part one)
Have you ever wondered how much more money you could make if you raised your prices?
But then a warning bell goes off in your head…
“if I raise my prices, I’ll immediately lose all of my customers… or at least a vast majority of them”
This explains why more than 90% of all small businesses attempt to compete on price alone, I’ve even come across businesses that have kept their prices at the same level for more than a decade. To put this into perspective, during the time that this person kept their prices the same, Petrol (Gas in the USA) rose by 24% (at its peak Petrol prices were actual 38% higher) and this increase in cost was met by the business owner.
Over the same period, the minimum wage in the UK has increased from £5.52 to £7.50 an increase of 26%. Again this increase was met out of the business owner’s pocket. Now don’t get me wrong, this person wasn’t on the breadline or anything like that but their lack of knowledge about how to, and why they should increase their prices cost them a considerable amount of money.
In order to raise your prices and get away with it, it’s important that you understand some basic facts about pricing.
Consider the real pitfalls when competing on price:-
Customers who buy on price will bleed you dry if you let them, they will attempt to suck the life right out of your business. As there is no loyalty from shoppers who are price based only, they’re only in it for what’s in it for them and will change at the drop of a hat or £/$.
– 80% of customers provide 20% of your income. The 80/20 rule is so pervasive that it’s even true in business, you’ll find that just 20% of your customers will provide 80% of your profit. This means that the other 80% are providing just 20%. So low price shoppers overall will take up the bulk of your time.
– Your competition perceives you through the prices you charge, so if you don’t want to be thought of as “Cheap and cheerful” or even “Cheap and Nasty” then you need to do something about it. Increasing your prices increases
Pricing Advantages
When you increase the price you charge for your product or service, you will automatically repel your costly price shopping prospects, leaving you more time to focus on those who really value your time, expertise and products.
– You will begin to attract those prospects who want more than just a low price… they want the best value.
That’s why it’s so important you continuously add value to what you sell by understanding exactly what your target prospects want and then giving it to them in the form of additional products and services.
So how do you raise your prices?
- Instant Price Increases
Here are two strategies to instantly raise prices with no significant impact on your overall number of customers.
The first strategy, consider the psychological barrier of price. This refers to the overall perception price can play in your prospect’s decision-making process. How many of your products or services lend themselves to this same opportunity?
Look to increase your price where it will have little psychological impact on your overall conversion rate.
If you offer a product or service for £92, raise it to £99. Any price you currently charge that ends with a zero through six… such as £90 through £96, increase that price so it ends with a seven or nine… such as £97 or £99. You will typically meet with zero resistance when doing this, and a zero impact on your conversion rates.
If you’re apprehensive, try a small test over a short period, If you see pushback from your customers, you can elect to immediately go back to your original price.
If you attempt to increase the first digit in your price, you may hit a major psychological barrier and run into trouble. A price of £1870 can be increased to £1877… or even £1,897 with little to no pushback. But moving to £1997 might incur some resistance. However, a price increase to £2,000 or more will most likely have a negative impact on sales.
Read next weeks installment to findout more about the second strategy
Twelve intensive half-day meetings.
