For those of us who have our own businesses or work in corporate America, the idea of a price increase isn't new. In fact, annual price increases are one of the fastest ways for you to earn a few extra dollars to improve margins and cover growing costs.
Price increases can negatively impact the sales and marketing efforts for today's busy marketing professional. A price increase on products or services that haven't changed creates a difficult scenario for current customers familiar with a lower cost. This is especially true when we hear objections from our customers expressing their dissatisfaction. With few or literally no changes to a given product overcoming objections is difficult.
One of the biggest concerns that marketers have about price increases is that of customer attrition. This is especially true in markets where your competitor is priced are lower or about the same as your offering. There is always someone else that your customer can buy from. A recent study I read indicated that even though price can be an obstacle to buying, current customers are less likely to leave you after a price increase.
Many factors determine whether or not a customer is going to start buying from a competitor. In any given market than can be thousands of competitors and in others only 2. But keep in mind that switching has emotional and financial costs.
Your customers, and all consumers for that matter, have been conditioned to find the lowest price possible for any given product or service. When rolling out a price increase, customers do not want to pay full price. This is why they continue to ask for discounts even after a price increase has been put into affect.
Price increase can be modest or substantial. Depending on the scope of your price increase, customers may react in a very different manner. Below I have listed a few things to think about before rolling out your price list. Keep in mind that you may want to segment your messaging to have maximum impact.
Articulate value that is greater than or equal to that of your actual price increase. No one wants to pay more money for the same old thing. It is very difficult to justify given the current state of the economy and the growth of a competitive landscape.
Know the cost to switch vendors. Research your competitors and understand their pricing. Does the offer they use clearly explain the pricing of their product? Your customer may perceive a competitor as costing less but in actuality their services cost much more or provide less features. Do your homework before introducing any type of price increase.
Segment your price increase. Not all customer are equal so treat them differently to make the transition smooth and get the biggest bang for your buck.The truth of the matter is that your customers are different. Some have been doing business with you for a long time. Others are working with you for the first time. Your price increase should be reflective of the individuality of your customers.
The final bit of advice I can give around price increases is that you should really understand your competition and what types of alternatives are available to your customer.
For companies that can provide good products at a fair price, switching is not a major concern. However if you are over priced or your product is not equivalent to something a competitor offers, then your job becomes more difficult. Marketing professionals may need to encourage their business to invest dollars in product enhancement in order to justify the price increase. Regardless, focus your messaging on value which can help lesson the blow of higher prices.
Price increases can negatively impact the sales and marketing efforts for today's busy marketing professional. A price increase on products or services that haven't changed creates a difficult scenario for current customers familiar with a lower cost. This is especially true when we hear objections from our customers expressing their dissatisfaction. With few or literally no changes to a given product overcoming objections is difficult.
One of the biggest concerns that marketers have about price increases is that of customer attrition. This is especially true in markets where your competitor is priced are lower or about the same as your offering. There is always someone else that your customer can buy from. A recent study I read indicated that even though price can be an obstacle to buying, current customers are less likely to leave you after a price increase.
Many factors determine whether or not a customer is going to start buying from a competitor. In any given market than can be thousands of competitors and in others only 2. But keep in mind that switching has emotional and financial costs.
Your customers, and all consumers for that matter, have been conditioned to find the lowest price possible for any given product or service. When rolling out a price increase, customers do not want to pay full price. This is why they continue to ask for discounts even after a price increase has been put into affect.
Price increase can be modest or substantial. Depending on the scope of your price increase, customers may react in a very different manner. Below I have listed a few things to think about before rolling out your price list. Keep in mind that you may want to segment your messaging to have maximum impact.
Articulate value that is greater than or equal to that of your actual price increase. No one wants to pay more money for the same old thing. It is very difficult to justify given the current state of the economy and the growth of a competitive landscape.
Know the cost to switch vendors. Research your competitors and understand their pricing. Does the offer they use clearly explain the pricing of their product? Your customer may perceive a competitor as costing less but in actuality their services cost much more or provide less features. Do your homework before introducing any type of price increase.
Segment your price increase. Not all customer are equal so treat them differently to make the transition smooth and get the biggest bang for your buck.The truth of the matter is that your customers are different. Some have been doing business with you for a long time. Others are working with you for the first time. Your price increase should be reflective of the individuality of your customers.
The final bit of advice I can give around price increases is that you should really understand your competition and what types of alternatives are available to your customer.
For companies that can provide good products at a fair price, switching is not a major concern. However if you are over priced or your product is not equivalent to something a competitor offers, then your job becomes more difficult. Marketing professionals may need to encourage their business to invest dollars in product enhancement in order to justify the price increase. Regardless, focus your messaging on value which can help lesson the blow of higher prices.
About the Author:
Michael Fleischner is an Internet Marketing Expert with more than 14 years of marketing experience. He is an author and founder of The Marketing Blog. Read his search engine optimization guide, SEO Made Simple, to improve your online business.
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