“Are you serious Tim? It’s hard enough obtaining new clients at my existing prices without giving them another excuse to shop elsewhere.” Deadly serious! Although I might only say to one easily offended, ‘9 Reasons Why You Must CONSIDER Raising your Prices’. Let me explain why I feel charging more is a good thing, and if you still do not agree I’d love to hear from you with your reasons, I really would.
Two thirds of all businesses either break even or lose money. Making a profit is obviously the no.1 financial goal of any business, so maintaining a margin is naturally a crucial aspect to your survival.
But raising prices scares the hell out of most company owners. It’s hardly surprising in a delicate economy when countless hard working company directors are scared of losing their existing customers, let alone finding new ones.
Since 2008 we’ve seen prices stay near to the ground, and go lower in some cases, than ever before, especially in retail. Discount sites like Groupon and KGB Deals have brought us unprecedented concessions. I saw on BBC3 this week a company get over 2,000 orders in only 24 hours through Groupon for his archery and falconry experience days. Reductions of 80% are common. But this company now has a new audience with 2,000 new contacts in it’s database to continually market to.
When competition is tough, and consumers shop around buying on price, you may think it’s impossible to put your prices up. Well, think again. Most purchase decisions are not based on price alone, we all know that. So what’s the motivation behind a buying choice? People make purchasing decisions for one reason and one reason only…..to solve their problems.
Having an issue solved is often more important than a saving, and price doesn’t even come top of the list when making assessment. It’s features and benefits you want as a consumer [unless it’s car insurance or a plane ticket for most of us!]. You want a solution. You want convenience too. Obviously there are other considerations but putting up your prices means good things for you, your staff, the healthy future of your firm and even the longevity and happiness of your customers.
Here are my nine reasons why:
1] You Will Have Higher Quality Customers
How often do you hear a story of a business owner who raises his prices and now is doing half the work with half the stress for the same turnover and higher margins? We’ve all heard this type of account at a business event of some kind surely? Lower prices DO NOT get you more business. If that was true the whole world would shop at The 99p Store and Harrods would be empty. Some people only and always buy on price but they’re not going to be your ideal target market. You won’t lose business if you raise your prices. If you do it’ll only be the clients who are currently a pain in the neck that make an exit, and let’s be honest, do you want them around anyway? It’s these who always take you the most time to manage and ask you for a weekend job on a Friday afternoon when you’ve arranged a end-of-week getaway in Brighton. I’ll bet it’s ones with the lowest value to your business who create all the stress.
The more a client pays the easier they are to work with. They’re simply better quality customers. They know what they want. They totally understand you’re running a business. They’ll be fairer with you. They do not ask you a ridiculous question like, “Can you do it for half price?” or, “I need you to come to my house and plug it in for me.” Good strong people have influence in the marketplace and far more of the contacts you are dying to meet. You will consequently receive more and better quality referrals.
2] You Will Have Much Improved Products & Services
If you are charging more than your competitors it forces you to back-up the higher money you’re asking. To justify the price when you sell you may well have to over-promise. Well guess what? Now you have to over-deliver! That’s an extremely good thing. What can you do to improve the experience the buyer receives when they use your service or the owning experience of that product? How can you gain a competitive edge over your competition so that price is never really questioned? These questions force you to raise your game and ask yourself how you can add more value?
If you can nail your USP [your Utterly Seductive Proposal] then money should never be a valid complaint. The more value you can pack into your offering the higher price you can charge, and the happier your buyers because they’re receiving a whole lot more value from you. Price is only based on ‘perceived value’, therefore, increase the value until prospects feel it is the time to buy. Higher value for buyers = higher prices for you…simple!
The happier your buyers are the more repeat business you’ll receive. The more repeat business you receive the more introductions and referrals come your way. These free and new business opportunities on a plate are, I believe, the fastest and cheapest way to grow your company.
3] You Can Remunerate Your Staff at a Higher Level
We all know that a company is only as good as the people employed there. If your firm is more profitable you can afford to pay your staff more. The more you pay the less the staff turnover. The lower your recruitment and human resources costs the higher your margins. Staff get to know clients the longer they remain in your firm and vice versa. Any across the board improved customer experience all adds up to you being able to charge more money.
4] You Will Attract Superior Employees
You’ll also find it easier to hire in the best employees and therefore be able to provide higher levels of service. Your labour force will have a better working environment. When you feel good you tend to be good. Clearly, if you invest in your business and create improved surroundings it’s a far nicer place to work. You’ll see less absenteeism and sickness. Happy staff means happy customers. Happy customers will pay you more.
5] Now Your Company can Really Focus on Customers
The more money you have coming into your bank account the better placed to are to service your precious clients. You can invest in new technologies and equipment. You will have more cash on hand for product and/or service development all with one clear goal in mind; to give your clients a superior and enhanced experience. This all adds up to you having an edge over your competition and being able to price yourself higher than them with exceptionally good reasons.
6] Put Yourself in a Position to Help Others Out
The larger your profits the more you’re able to give to worthwhile causes. You’ll be helping those in need and allowing the charity to continue its work will make you feel good at the same. We all love to give and help, but it’s not always possible. Some companies make it known what they do for charities as a good bit of PR. We’ve all seen that. It’s hard not to feel praise for that business and think they are a generous and giving bunch. I’ve also seen promotions that say they’ll donate so much to a charity for every purchase. This is another good reason one will pay a little more when buying something; you’re solving a problem for yourself whilst simultaneously helping others.
7] Create Intrigue in Your Company
Higher prices make you stand out from your competition. Consumers will say, “Why do they charge more? What’s that all about?” Intrigue is created. This curiosity gives you a chance to engage with your prospect, build rapport and work towards a satisfactory conclusion for you and them; doing a deal. Having an alternative ‘air’ about you will all help you achieve higher prices because of differentiation.
8] You Will Generate Contented & Loyal Customers
And furthermore, I don’t know why it is, but when you make a large purchase you’re usually pleased about it and feel good about yourself. If you feel good you want others to feel the same and are far more likely to urge others to follow you and repeat the experience. This results in more repeat clients for you. Superior products and service by happy motivated staff who work in a well funded company are going to provide one of the best, if not THE best, buying occasion possible. What better way to breed loyalty? I could have put REPEAT BUSINESS as another bullet point and made it ’10 Reasons Why You…..’ but I didn’t. There are a lot of spin-off benefits of raising your prices of course.
9] You Will Have More Cash Available for Your Most Vital Activity
If you don’t think marketing and new client acquisition is your No.1 priority then you probably haven’t stopped to think about it for long enough. This essential activity can cost [it doesn’t always have to] but aggressive promotion requires the intentional direction of your valuable funds and resources. The more you can invest the more business you’ll do. Your bank balance is inextricably linked to the amount of marketing your company engages in. So charge a premium price to allow you to continue to maintain a flow of new clients, as you’ll inevitably lose a few along the way.
And one more….[Oh yes, this article is SUCH good value!!!]
10] You Will Have Less Clients to Worry About
Did you know that if you put up your prices by 10% you can afford to lose 25% of your clients? Less clients means more time to devote to the ones who have stuck with you. You only have so many hours in the day, so the less clients you have, the more service you’ll be able to give. This undoubtedly breeds loyalty and long-term customers…and we all know the delightful benefits of long-terms clients right? – Most of the above. With less clients you also don’t lay awake at night worrying about what you have forgotten. Could you survive pandering to the needs of ten Superstar Clients?
So good news there I think you’ll agree. However there is BAD NEWS for those do the opposite. If you are one of those Japanese Zero Fighter pilots from the Pacific WWII, and suicidal enough to compete on price please read on. Should you reduce your prices by what appears a small margin of 10%, to maintain the same level of profitability you will need a massive 50% more clients buying at the same levels…or to put in another way, an increase in sales of 50%! Think twice before giving discounts and lowering your price just to land work. Instead, build the value up.
Scared to make the move? To make it feasible and to gain a competitive edge look at your competition and ask yourself who offers exactly the same as you for the same price? Even if you find some and you’re exactly comparable you may have been in business longer or have another advantage to enable you to give good reason for your higher tariff. Assure your customers you can give them the best product/service money can buy and promise them there IS a noticeable difference when doing business with you.
One thing you can say to a potential client in a price sensitive situation is, “It’s only too much if you planned on taking care of the balance in full and why would anyone want to do that?” Always move away from a single payment scenario and do what you can to provide financing, even if it is by spreading payments. This isn’t always possible, or you might say, “We just don’t do things that way and neither does our industry,” but so what? Are you a follower? Ask yourself what is it you can do to make it easy for people to buy from you?
You must raise your prices. I don’t care if you raise them by £1, but do it today. Why wait? Go back through the points above and think what you can do to improve what you already have and pack in unbelievable value for your buyers. You could even analyse your range and introduce premier lines if you do not wish to tamper with already successful lines? When you do this, and create new offerings, you have the opportunity to drop your least profitable ones.
Don’t be concerned about your existing printed price lists, tell anyone who queries it they were outdated the day you improved your service and increased the value for all your customers.
And Finally…
Just because someone says you’re charging too much, or they don’t want to pay what you’re asking, does NOT mean they won’t do business with you. People complain about price all the time but frequently go on to pay it. Don’t you?
Tim Coe
Why not follow me on Twitter for more marketing gems?
Follow @myUSPbiz
