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Are you worried about raising prices?

01 Jun

Are you worried about raising prices?

  • Posted by tonyw

Whether your company is B2B or B2C, you will face the same concerns about raising your prices. And let’s face it – over the past ten years there’s hardly been a good time to do it.
But a business can’t carry on making trading losses. It simply doesn’t work. So the need for putting up your prices is clear. And there’s no faster, more efficient way of improving your bottom line than upping your price.

But how will your customers take it?

First – consider the justification. How has the RPI and CPI changed since your last increase? Have your nearest competitors raised their prices? If so by how much? And if they haven’t, maybe it’s because they look to you to increase yours first. If so they’ll probably follow suit when you take action.

Secondly – consider how your customers perceive the service they receive from your business. Every business and brand is seen by its customers as providing a certain level of value – this can be above average, average, or below average value. It depends on the customer requirement you’re trying to fulfil as to where you are positioned on the’ value spectrum’. In turn this will help you determine options for your pricing.

 Value is derived from the combination of quality and price. ‘Quality’ is defined as the specification required by a customer for a given product or service, and can of course vary from high to low in any given category.

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Likewise, the expectation of acceptable price will range from low to high. You can have a situation where the value delivered can be acceptable at a range of quality and price levels. This is the line of average value. Great value occurs when the quality provided is at a lower price than average for that level of quality. Likewise, poor value occurs when the quality delivered is below the average value line. And average value is delivered all the way along the line.

Those companies that deliver above the average value line will tend to outperform those below because they offer their customers above average value. So, when it comes to pricing it’s vital a business understands where the quality it provides compares with others in the same category. Again this comes back to the customer need it’s aiming to meet and, critically, knowing what that is in the first place. In turn this helps a business to understand where it should set its pricing to remain competitive while optimising profitability.

So overcome your worries about raising prices – but make sure you do your homework first!

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