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When Should I Increase or Decrease Prices?
November 5, 2007
The decision to raise or lower prices is a difficult one without knowing the industry or product involved—but the decision whether or not to change prices is not as important as the decision about how to accomplish the change. The key is timing.
So…you’ve decided you need to make changes to better your bottom line. Here’s how to do it without pushing away your customers.
- Timing is everything. If you decide to raise or lower prices, you need to pick the right time. When raising prices your business’s seasonality, growth stage, and sales cycle will affect your decision. For example—if you’re lowering prices, choose a time when the change will have the most impact; if you’re raising prices, choose a time when you’ll encounter the least resistance. I opened my business October 5th and I kept the prices extremely low and competitive to attract clientele. All I’ve heard from my customer’s and staff is how wonderfully priced my merchandise is—I am now starting to increase prices slightly while trying to remain competitive. When the holidays are near—shoppers pay less attention to an increase in prices.
- How much to change prices? I do not believe in major price hikes. I feel price hikes should be done in stages based on the theory that customers will be accustomed to higher prices over time and be willing to tolerate them as they become more loyal. Sometimes a series of smaller hikes may not even be noticed by customer who would be seriously put off by a single large one.
- Understanding the change in value and price. Many businesses change value without changing price. My staff member was complaining about this just the other day—the toilet paper he prefers—use to be X amount of sheets for $6 for 8 or so rolls. Now that specific tissue paper has remained the same in price for the same amount of rolls yet the number of sheets has decreased substantially. This has allowed tissue makers to maintain the perception of holding prices steady or even reducing them, while they are in reality increasing the per-sheet charge for tissue paper. Shoppers who notice such pranks may resent them. But if a competitor makes a value change, many companies feel they have to follow suit or be perceived as high in cost. Many businesses get the best long-term results from increasing price and value. Careful attention to what happens when you move pricing and value points can show you the way to pain-free, profitable growth.
Posted by Shanu Singh Guliani on November 5, 2007 | Comments (5)
