Each year, thousands of companies consistently raise prices to increase margins and offset growth in various costs. For anyone working in corporate America, you are quite familiar with this tactic. For marketers, rising costs are always a challenge.
Price increases can negatively impact the sales and marketing efforts for today's busy marketing professional. A price increase on products or services that haven't changed creates a difficult scenario for current customers familiar with a lower cost. This is especially true when we hear objections from our customers expressing their dissatisfaction. With few or literally no changes to a given product overcoming objections is difficult.
The biggest issue that many marketers have about the dreaded price increase is losing customers to lower priced competitors. This is especially true in segments where competitors products are priced less than your offering. There is always someone else that your customer can buy from and sometimes that is a very real option. You will be glad to know however that a recent study found that few customers migrate to a competitor based on prices alone.
There are a number of reasons why customers do not jump ship so quickly. The bottom line is that switch has costs associated with it. These costs are both and emotional as well as financial.
Consumers have been conditioned to ask for a discount or find the sales rack. When introducing a price increase to your customers they are going to want to avoid it at all costs. This is just human nature. But this also explains why they will continue to ask for discounts long after their customers even though they wont leave you.
Below I list just a few things to consider before communicating a price increase to customers. Do what you can to lighten the load or simply divert attention to something of greater value.
Increase the value of your product and raise the price. Doing so allows you to justify the price to your customers. This removes any type of obstacle associated with price increases that are simply a way to earn the company more money but provide no benefit to the consumer. Determine how you could provide additional services, support, or terms to support a price increase.
Evaluate the cost for your customer to switch. This consideration has always been popular among phone companies. They not only want to sell more to existing customers, but they also want to attract new ones. You must be able to explain to your customer what costs he will incur if he changes providers. These costs may be both financial as well as emotional. How much time, energy, and resources will it take to truly switch?
Segment your price increase. Not all customer are equal so treat them differently to make the transition smooth and get the biggest bang for your buck.The truth of the matter is that your customers are different. Some have been doing business with you for a long time. Others are working with you for the first time. Your price increase should be reflective of the individuality of your customers.
In closing, one thing to keep in mind is that you should really understand who your customers may consider purchasing from if you weren't providing them products or services. Then, be sure to understand what their pricing structures look like.
For companies that can provide good products at a fair price, switching is not a major concern. However if you are over priced or your product is not equivalent to something a competitor offers, then your job becomes more difficult. Marketing professionals may need to encourage their business to invest dollars in product enhancement in order to justify the price increase. Regardless, focus your messaging on value which can help lesson the blow of higher prices.