Proper pricing is a significant part of running a successful business. Whether you’ve been running the business for a while now, or have just started recently, increasing your prices is always tricky. In this article, we will be tackling on signs that you should increase your prices now.
It is especially scary for freelancers and sole traders, as well as beginners in the business to increase your prices. There’s always the danger of driving your customers away, or discouraging potential buyers because it’s “too expensive”.
However, keeping your price low can also harm how your customers and potential consumers see your brand. Undervaluing your product or service might lead them to believe your business is not competent enough. It also sends the wrong message that your product quality is compromised, such as that you are using cheap materials as a substitute to higher quality ones to keep your prices low. Regardless of whether this is the case or not, it also lands a blow on your business’s reputation.
Comparing your price against your competitors is a good starting point, but it may not be enough. You have no accurate idea of their overhead and costs, nor their level of service and product quality. They might even be scared of increasing their prices too!
Most businesses set a yearly price increase as a standard. However, for your price increase to be effective, and not damaging to your business, you should do proper research before changing the prices of your goods and services.
One of the biggest pricing mistakes you can easily avoid is bad timing. How do you know that the time is right? Here are signs you’re in an excellent place to increase your pricing.
Customers, both old and new, are surprised at how “cheap” your products and services are.
When a new customer inquires about your products and services, and they express surprise at how low your prices are, this is a good sign that you can increase them, as this usually means your market recognizes the value of your products and services offered. They are willing to pay more than the price value you have currently assigned.
Moreover, this surprise at your low prices indicates a vote of confidence in your business’s competence and quality, allowing you to raise the pricing and remain competitive with other companies in the industry.
Your recurring customers are incredibly happy.
When customers get value for the money, they will most likely repurchase. Providing this level of quality in your products and services consistently also ensures customer loyalty.
If you keep getting good reviews and 5-star ratings, you can be sure that you are giving your customers the value they want and deserve. Give them something so great they’ll be sure to stay regardless of the price increase.
It is time to expand your business.
Maybe you have been fully booked for months now, and can’t take on any more work, appointments, or orders in the foreseeable future. It is one of the most substantial signs that you need to increase your price. There is a high demand for what your business offers and the law of supply and demand dictate that you are in the clear to raise the price.
It is also a sign that your business is ready to expand. You can no longer maintain your business with the current workforce you have. The natural course is to hire more people and expand your operations to ensure that you can continue to supply your customers’ needs. As you amp up your talent pool, you will have a justification for your price increase, as long as the quality of your product and service proves the upgrade worth it.
Just make sure that you inform them you’ll be raising your prices after a certain period (with a set date or deadline) and that all new customer purchases or transactions will start with the new rates.
Costs have increased.
Your costs also determine your pricing to make the product. Have your suppliers increased their pricing on the materials and equipment you use for your business? Did they increase the price of services you need? Whether the reason is inflation or an increase in market demand, you have to consider this increase in cost.
Keep a close eye on the % increase of your expenses, especially during times of economic growth, and incorporate them into your price increases. You have a business that needs to keep on running, so maintaining your profit margin is necessary.
The same goes for services offered with limited overheads. Keeping a record of regular check-ins to review your outgoing and overhead expenses is handy, especially since it is trickier to keep track of increasing overhead costs.
You are not making enough money.
If you have been giving quality goods and services to your customers, and they are happy with the value they get. They are willing to pay money to avail of the products and services you offer, but you are still not earning enough, you are in desperate need of a price increase.
It could mean that there was an error when you were computing for pricing; it may even be wise to get a professional to help you out on how best you can maximize your profits.
There are many other scenarios where the price increase is justified and even called for. The truth is, a sign is not necessary to dictate price fluctuation. Some research shows that most people think the most expensive product in the market must be the one with the highest quality. Whatever your reason may be for changing your prices, the trick is in how you relay the news to your customers without driving them away.
To not tick off your customers with your price increase, prepare your reasons ahead of time to answer objections you might encounter. Of course, timing is everything when changing prices. Consider the impact of timing on your customers.
Adding value to your product or service as you increase its price also ensures that your customers remain satisfied–they see where their money goes and feels the price increase was justified. Lastly, you can offer bundle packs or similar promos and discounts to your products and services.
If you are seeking more advice on how you can repurpose your business or more business planning so that it would snugly fit into the present world situation, Annette & Co. is here to offer you a FREE consultation 📞. Annette Ferguson – Chartered Accountant and Certified Profit First Professional – can help you unlock financial strategies to improve the profitability of your business amidst an economic crisis.
Before you make any drastic decisions, seek out a professional’s opinion. You can also follow us on any of our social media channels