Sometimes, businesses just have to raise prices. It could happen because the cost of a key production input has suddenly shot up, or in reaction to the sustained pressure of unrelenting double-digit inflation. For most sellers, the decision to add to their prices isn’t taken with joy or an expectation that they’ll be understood by buyers. They’re concerned about the effects of an increase in prices on demand for their products, but raising prices might be the only way their enterprise can carry on without being pounded out of existence by high production costs.
But how can you carry out an upward review of your product’s price without painting yourself as just another insensitive, greedy and exploitative merchant? After all, except your business is a monopoly, you could lose customers to competitors that offer lower prices, or don’t have the image of a customer-disregarding money grabbing venture.
Here, we’ll take a look at 3 ways you could introduce a price increment to the market and keep buyers coming to you even after you’ve done so.
- Nail the timing
It’s better to raise prices when you’re having a sales boom than to implement such a change in periods in which less activity is recorded. On the whole, you’re less likely to get a negative reaction from customers when your product is in high demand than when there’s little request for it coming through. This is especially true for periods of economic boom and bust. Buyers find price increases more tolerable in times of economic buoyancy, but they’re extremely conscious about pricing when things are generally tight.
The introduction of a new product may also be a good chance to raise prices. You could present the new product as an improvement on what you’ve been selling (and make sure it is!) and use this as the basis for an upward revision of the price.
It’s also important to watch what your competitors are doing with their prices. A rise in the price of products offered by other players in your industry (and specifically, your locality) could be a good signal for you to increase prices too, without the fear of losing customers to other companies. If you’re a market leader and your position is quite comfortable, you may even afford to react to an increase in production costs by raising prices and allow other similar businesses to follow suit. As long as it’s not a sharp increase, your sales aren’t likely to be significantly affected in a negative way.
- Offer deals and discounts
This is one way to introduce a price change without shocking your customers as a result. Instead of just slapping on extra sums to the preexisting price, you could announce a sales promo and offer your product at a price that’s a fraction of your new price.
For example: you’re selling Tee shirts which you’ve priced at ₦2,000 per piece. Instead of just jacking up the price to ₦3,000 (the new price), you offer a discount of 40 percent on the Tee shirts. This means you’ll be selling the shirts at ₦1,800 (60 percent of the new price), which is actually lower than the old price. Just make sure you point out that the Tee shirts are worth ₦3,000, and that the ₦1,800 price is a good bargain. This’ll make your buyers expect the price to go up to ₦3,000 after the promo ends- and be comfortable with the change.
- Present products in grades
If you want to sustain revenue levels after a price increase, you could consider presenting your product in a number of grades or classes. This means that you don’t have to make the price increase so obvious; simply split the product into various categories (based on quantity, quality or some other criteria), determine the total cost for the product, and allocate prices on the basis of the differences between the categories, with the aim that they’ll all add up to the total cost originally calculated.
Here’s an example. Suppose you produce powdered milk. You only make 500g packets of milk, and sell them at ₦800 per packet. Then production costs rise, and you find that you have to increase the price of milk from ₦800 to ₦1,000. You could start producing three different sizes of milk packets instead. So you’ll have small 250g packets which will sell for ₦600, a 500g for ₦1,000, and 750g for ₦1,400 (note that the sum of these prices is ₦3,000 for 1,500g of milk, the same as what you’ll get if you stuck to selling 500g alone at ₦1,000, and selling 3 packets of this size at the new price). The idea is that you’ll be giving customers options to choose from; they’ll then decide for the one that their budget allows them to get.
If you already have graded products and you want to increase your prices, you can spread the cost over the array of grades in a way that takes into account the demand for the product, and the segments of the market (high end, low end, etc) that are likely to purchase them.