If you have ever worked for a company for more than one year, then you have no doubt experienced price increases. This is one of the fastest ways for companies to earn a few extra dollars and quite frankly one of the easiest.
As marketing professionals trying to sell around price increase, we more often find that traditional campaigns become less effective. All it takes is one heavily weighted variable to have a negative impact on campaign performance. This is especially true when we hear objections from our customers and are unable to fully justify the increase. With few changes to a given product the prospect of creating value is limited.
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.
Many factors determine whether or not a customer is going to start buying from a competitor. In any given market than can be thousands of competitors and in others only 2. But keep in mind that switching has emotional and financial costs.
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.
Price increase can be modest or substantial. Depending on the scope of your price increase, customers may react in a very different manner. Below I have listed a few things to think about before rolling out your price list. Keep in mind that you may want to segment your messaging to have maximum impact.
Articulate value that is greater than or equal to that of your actual price increase. No one wants to pay more money for the same old thing. It is very difficult to justify given the current state of the economy and the growth of a competitive landscape.
Know the cost to switch vendors. Research your competitors and understand their pricing. Does the offer they use clearly explain the pricing of their product? Your customer may perceive a competitor as costing less but in actuality their services cost much more or provide less features. Do your homework before introducing any type of price increase.
Do not treat all customers equally. I know it is taboo today to say such a thing but not all customers are equal. Some have been with you a long time. Others are working with you for the first time. Your price increases should reflect the individuality of your customers and the impact you wish to have. Consider treating customers differently.
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.
Michael Fleischner is an Internet Marketing Expert with more than 14 years of marketing experience. He is an author and founder of The Marketing Blog. Read his search engine optimization guide, SEO Made Simple, to enhance your internet business.. Also published at Prices Increase And Marketers Need To Get Creative.