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Pumping Up Prices
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Article 6: How Often To Raise Prices
Trying to determine how often prices can or should be raised is like wondering how much salt to put in your soup. It’s anyone’s guess until you actually do it. You will know whether you were right only after you’ve done it.
Prices never have to be raised – unless you must or unless you want to.
1. Raise prices when you must.
No business stays in business for long unless the bottom line is written in black ink.
If your costs and expenses continually mount, but your prices don’t keep pace, your profit margin will shrink. Given enough time and enough increases in costs and expenses, at some point your profit margin will disappear.
If you sell products that are periodically improved and updated, each new version poses a reasonable opportunity to increase the price.
Presumably, new and improved products incur new and higher costs to produce. Consumers are accustomed to paying a bit more for products that promise more than previous versions provided. That’s your opportunity.
The flip side, however, is that you may wish to ingratiate yourself with customers by making a point of not increasing prices for every new, improved version. This helps build brand loyalty and makes your future, eventual price hike more tolerable.
Tip: If you’ve updated your product without price hikes, when you finally do increase the price, be sure to remind buyers how many upgrades there have been without an increase. That neutralizes some of the annoyance with the increase.
2. Raise prices when you want to.
While mindful that any price increase runs the risk of losing customers, you’re free to increase prices any time you want. There’s nothing nefarious about wanting to make more money on what you sell. Those who buy from you will let you know if the increase is unreasonable.
If you originally set your prices based on incomplete or too-conservative estimates of costs and expenses, you may want to make up for that error. Go ahead. It’s permitted.
Tip: Raising prices always runs the risk of driving away customers, so when you first set your prices, set them properly.
Some startup business owners intentionally under-price goods and services hoping to capture new customers’ attention. The problem is the price you set establishes the perceived value of what you sell. It’s much harder to raise prices later without losing customers than it is to set a proper price in the beginning.
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