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Pumping Up Prices
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Article 4: How To Approach Customers With Price Increases
When someone is told he must spend more than he is accustomed to spending, it’s bad news. Is there a good way to break the bad news? Yes.
Here are three ways to couch the ouch in order to take the bad out of the news.
1. Educate
Take customers into your confidence. Be truthful. It’s not only the right thing to do, but also the prudent thing. Imagine if customers found out later you had lied.
Customers’ costs and expenses increase too. Appeal to this common experience. Explain the reasons behind your price increase, preferably before you make it official. Then explain it again once the increase becomes effective.
At the least, customers will understand you are only meeting increased costs, not gouging them. They may even be sympathetic and displeased with the source of your cost increases (such as heavy taxation), rather than with you.
Conversely, if you charge more without bothering to explain, you risk being considered indifferent, or worse, greedy.
2. Add value
Your buyers already think that what you sell is worth the price. They say so every time they pay the price. It follows, therefore, that if you provide more value, these same buyers are likely to agree to pay more.
If 10 pounds of widgets is worth $50 to customers, then 10 pounds of widgets in a waterproof widget carton with a money-back guarantee may be worth $55.
By adding value (a container for water-perishable goods) and by adding perceived value (a money-back guarantee), customers may be willing to pay higher prices that more than cover your additional costs, and increase your profit margin.
3. Appeal to loyalty
If your customers are happy with you, if they keep returning, if you’ve won their trust and respect, you can capitalize on this good will.
As long as you have such a relationship with your clients, it doesn’t hurt to remind them of that bond when you notify them of price increases. Be sure to thank them for their loyalty when explaining the reasons for the higher charges. In return, you can raise prices and expect little if any adverse reaction or decline in sales.
Tip: No matter how reasonable or necessary or well-explained your price hikes may be, it’s wise to test them if possible on a portion of your market before applying the increases across the board. If the tested price hikes increase your profit, it probably signals that the way is clear to apply them overall.
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Pumping Up Prices
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