Increasing prices is one of new business owners’ most challenging questions. This question requires considering several factors, such as profit margin, sales volume, and customers. A sudden price surge could boost businesses as it provides more profit, but one has to consider the risks that also come with it. we will explore methods to increase prices without losing customers.
Why should you increase the price?
Profit
For a business to grow and develop over time, it must first become profitable. One way to achieve this objective is by increasing the price of what you are trying to sell. Although profit depends on factors like market acceptance and sales volume, increasing prices is the first step business owners must take carefully at the right time.
Show your value to your customers
While selling your product at a lower price will increase the sales volume, increasing the prices shows that you believe your product is valuable. Increasing the price of your products showcases your trust and belief in the products, Automatically attracting more customers, if not sales at first. A price increase will attract customers’ attention; even if they do not intend to purchase the product, they want to figure out the reason behind the surge in price. To be more precise, the price increase works as a hook, and after you have gained customers’ attention, you must be ready to deal with it in a manner that will lead to more profit.
Brand recognition and prestige
Customers usually choose the less expensive option out of two or several products but always remember the price of the more expensive options. They might even talk about those products with their friends and relatives and explain how they had to choose the cheaper product. Along with the advertisement effect, it creates a sense of longing for the expensive product in customers. So next time, they save more money to buy the expensive item they once could not pay for or preferred not to pay.
When your brand, or better yet, product, is established to be expensive, it may become a luxurious product after a while. After this, you do not need to justify the prices of your products based on their practicality or quality because you are selling prestige and recognition alongside your product. For example, if you wear Gucci, even random people ask if that’s Gucci and if you say yes, they will compliment you and adore you. Gucci or other big luxurious companies can sell their products for their desired price.
When is the right time to increase prices?
Before you actually increase prices, you have to wait until the right time. The right time for rising prices differs for each business, so we cannot suggest an exact time, but we will explore the factors you should consider before raising the prices. first, you have to determine your intentions before changing the price of your product. why am i doing this? do i have to keep my business alive by increasing the prices, or is it just greed for more money? of course, anybody with a product wants to profit from it, but once you decide to do something because of greed for money, you might be making a huge mistake. Greed can shut your eyes on solid facts. For example, you know that the market and the consumers can’t handle the surge in price, but you do it anyway because you have this lust for more money. your intentions are essential because they directly influence the future of your business.
Sometimes, you notice a huge upward trend in your product sales volume. This upward trend has multiple implications. In the first scenario, the price of your product is lower than its true value, so you experience a high sale volume. In this scenario, if you do not increase the price, it is highly possible to go bankrupt due to the high cost of manufacturing. Basically, you can lose money by selling your product. In the other scenario, the upward trend can occur as a result of a market reaction to the quality and true value of your product. You can continue to sell your product at the same price, but you have indicators showing that you can actually raise the price for more profit.
Have your reasons for increasing the prices
Notice that customers always ask for a reason, no matter how small the price increase. Regardless of your reasons, you must always be prepared to answer this question in a way that sounds reasonable to your customers.
Better Products
You must be able to convince your customers that your product is not just more expensive than other products but also better and worth the price it has been assigned. You may face some resistance from customers, but it is crucial to support your product no matter what and try to sell it as best it can. If others sell it at a lower price, it cannot be the best product. Increasing the price of your product could support that you are selling the best product even if you have to deal with some resistance at first.
Better services
By providing more services to your customers, you can justify increasing your product price and sell it as a better product. Nowadays, customer service is less appreciated because big corporations and big brands do not need to give their customers a lot of service to sell their products. Better customer service could help new businesses stand out in their market and stand out from their rivals.
Customer service mostly depends on the services you want to present to your customers and how you provide them with them through your salesmen and saleswomen. In addition to the usual customer services provided by most companies, you could offer extra services in your store, such as serving drinks, customary supplies, easy and free exchanges, and personal assistance. This requires you to employ empathetic salespeople with great communication skills.
Find ways to satisfy your customers
At first, when there is an increase in the prices of a product, no matter how justifiable it is, you may find yourself in a position constantly battling with customer’s resistance to pay more money for your product. In this case, you should prepare beforehand to avoid getting frustrated with customers. If you are frustrated with your customers it will lead to making some horrible and unrepairable mistakes that could cost you your business or at least a loyal customer.
Store Credit
To keep your customers satisfied, store credit is a great way because when your customers think to themselves is it reasonable for me to purchase this product after the increase in the price they might say to themselves that even though it is more expensive than before, I get more store credit and that can justify this purchase. So, you have to consider store credit not just for retail or specific promotions but also as a temporary way to please customers after you increase the price of products.
Use Social media to your advantage
You can easily use social media to announce positive news about your product and services. For example, after you have increased the price of one of your products, you can create a reel and explain offers and services, like store credit, free return policy, and such. You can also add a prize for your followers or customers who comment on or share your post. Prizes like the first ten people to comment on this post get a 5 or 10 percent discount on the product that was presented in that post. You create a sense of urgency and exclusivity by promoting this. Firstly, customers have to hurry and comment to get the discount; secondly, it is only for followers on social media, not whoever goes to that store. Another advantage is that you take the attention away from the product’s price and simultaneously advertise the product with an increased price.
psychological aspects of increasing prices
Psychologically, increasing the price of your products can be very tricky because it depends on both the product and the target audience. In the capitalist world that we live in, everything is about consumption. You are alive as long as you consume, and your worth is determined by the money you spend buying different products. Based on this hypothesis, there are two scenarios for customers: there is a group that only buys for the sake of buying, and they believe the more expensive, the better. The other group that struggles financially is careful about what to purchase to purchase better things later; the ultimate goal here is to buy and consume more, either now or later.
Before increasing your product price, you must identify which consumers you can please more with your product. Is your price expensive enough to please the first group? Can you persuade the second group that your product is the product they have been saving their money for? Based on your answer to these questions, two different scenarios could arise.
1. Increase in sale
The optimal situation would be when you increase the price and experience an increase in sales. If you still do not need to be established as an expensive brand but can successfully present your product, it is more likely that many of your customers will be from the second group of consumers. Using strategies like exquisite customer service, which was mentioned earlier, you can persuade your customers that your product is what they have been waiting for and that they need to spend the money they have saved for a long time on it. This may sound like a dream, but after a while, you have to consider whether you can actually handle this amount of sales. By handling the purchase amount, I mean your manufacturing capacity.
2. Less customers, more profit
Because the most money in the world is in the hands of only a few people, if you attract the first type of consumers, you are likely to experience a low volume of sales but a lot of profit. If your product is not established as a prestigious brand, low sales volume can damage your business in a way you could have never imagined. This strategy will work great for you if you want to gather a lot of money soon and have limited manufacturing.
Risks of increasing prices
So far, we have explored advantages and ways to increase the price of a product without losing customers. Before deciding to increase the price of your product, you have to consider and examine the risks very carefully, as it could have dire consequences.
Lower sale volume
The first bump on the road that many businesses have to face on their road to profit is a decrease in sales volume. Lower sale volume happens as a natural reaction to an increase in product price; it can’t be expected to sell your product as well as when the price is lower. At first, it is natural to face this problem, but if you fail to overcome it with the strategies mentioned earlier, your business will face a considerable loss. Before increasing the price of your products, you must organize your budget, calculate your debt and credit, and estimate the period you can afford to keep your business alive with lower sales volume.
Market Competition
If you are a business owner and your business is still in the early stages of development, and you want to seek more profit by increasing the price of your products, you should first analyze your competition, especially the big corporates with unlimited resources. While for a small and new business, increasing the price is a vital act, some corporations that have companies in other countries with lower manufacturing costs can sell the same product as you but at a lower price, and there is no need to increase it. So, you have to analyze your competition first and try to figure out a plan so you can compete with them.
Bankruptcy
Toys “R” Us: The well-known toy retailer filed for bankruptcy in 2017 due in part to increasing product prices. As the cost of toys and other children’s products rose, Toys “R” Us struggled to compete with online retailers and maintain profitability. The electronics retRadioShack ailer declared bankruptcy in 2015, partly due to rising product prices and competition from online retailers—RadioShack’s inability to keep up with changing consumer preferences and increased costs contributed to its downfall. keep in mind that if you are on the verge of bankruptcy, you can apply for business grants.
