Successful businesses survive and thrive not because their business model is on-point. But because they know their numbers really well, especially their profit margin. With the rising business cost in today’s marketplace, operating from a thin profit margin is a recipe for disaster.
It stretches the business to its limit. And causes stress to the staff as well as the customers. That’s why it’s important to operate any business at a healthy margin. That way, business owners can make informed decisions about their marketing strategy.
The importance of timely price increases
We know costs are always on the rise. There’s no arguing about that. And businesses need to operate at a healthy margin which is why pricing strategy is crucial in any business’s sustainability. Raising prices is a solid marketing strategy once done right.
In fact, price increases should be the heart of every marketing campaign. Price increases are best done when the market is indicating that it’s ready to pay more. This is called the “sweet spot” of the buying cycle. It’s the center of the business’s profit and the price the market is willing to pay.
A timely price increase does two things for your business: 1) sustain the business’s operation, and 2) generate higher demand when properly executed. As mentioned, pricing is a strategy. You can use it to increase the market’s demand for your product. Just like how famous brands such as Channel did it.
**Recommended read: A Lesson From Luxury Bags – The Power Of Scarcity
How to increase your price without losing customersÂ
Your customers buy with emotions and justify their purchase with logic. It’s the universal buying language. It’s our biological response. And your job as a business owner is to use it to your advantage and bring value to your customers.
First things first, you have to let the prospects see the value in your offers. In other words, they need to see how your product or service solves a problem or fulfills a need. This is key because people don’t buy things that aren’t valuable in their lives. Nobody ever does that.
Letting your prospects “see” the value makes them excited. Most of them are sold the moment they got emotionally triggered. That’s the first thing you need to do before you increase your prices.
(Image source: S1 Design)
Secondly, you have to tell them WHY you’re increasing the price (if you’re planning to do so). Business owners often make the mistake of increasing their prices out of nowhere. While it’s wise to increase prices due to rising costs, it has to be done properly so competitors won’t win those customers over.
Before prospects make their purchase, they tend to justify their purchase. They’ll only proceed when the purchase makes sense. Questions like, “Do I need this?”, “Is it worthy at this price point?”, “What do I get from this purchase?” are the typical questions they would ask before swiping their cards.
Explaining the “Why” for your price increase
Remember, emotions sell your offers but logic closes those sales. We already touched on the topic of justifying a purchase. What we’re about to discuss in this section are the different ways to explain the “why” of your price increase.
The ‘slots are limited’ method
When supply goes down, demand goes up. Logically speaking, increasing prices with a limited supply is a great explanation. E.g. “We’re running out of slots and increasing our capacity to serve you better. Please note that prices are up by $30 to cover our operating cost.”
The ‘promotion period’ method
Another perfect way to increase your prices is promotions. E.g. “We’re expanding our business to serve you better. Lucky you! We’re throwing a promotion of 20% OFF until 31/12/2021 (our Christmas present to you 😁). Grab yours now while you still can! In 2022, our prices will be up by 10% for our signature offers.”
The ‘use now, pay later’ method
You proceed to increase your price accordingly. Let’s say from $3,500 to $5,000. Then, you can offer a payment plan to ease the pain of buying. E.g. “Announcement…our price for The Elite Private Mastermind is now $5,000 per year. We understand cash flow can be troublesome for many. For your convenience, we’re offering a 5-months payment plan for only $1,000 per month”
The ‘bundle it together’ method
Sometimes, it’s better to offer more when the price is higher. This method is best used for items that are easy to sell. E.g. “From 01/01/2022 onward, prices for our SkinGentle products would be up by 15%. And the good news is…you get a free gift for every SkinGentle purchase you make! Yay, happy shopping!”
Final words
The effort to increase your prices is a bold and strategic move. It’ll contribute to your bottom-line profits. However, if it’s not done properly, it will backfire. That’s why it’s so important to justify your price increase. And also test it on a small group of customers before launching it live.