By Tabitha Wellman, CEO, Innova Business
I’m always amazed how many businesses don’t increase their prices for fear of losing customers. Most business owners I work with, particularly business women, often underestimate the value of their products or services.
There are a couple of clues that will tell you when it’s time to raise your prices:
Clue 1: When you first purchase your business.
I have a standard rule of thumb to raise your prices by 10% when you first purchase your business as it’s the best possible time to increase profits.
Now before you say that you’ll lose customers and not be competitive,
Generally, most customers don’t notice the price increase and those that do are generally what I term your ‘D’ class clients. Which is great! Give your D customers to your competitors and spend the additional time treating your A&B clients like royalty. These are the customers that are with you for a lifetime.
Clue 2: When you’re fully booked and can’t fit any additional clients in
When you’re busy working in your business and you have a waiting list of clients, this is the time to recognize that your pricing can increase. A 10% increase could add solid profit to your bottom line, but more importantly it helps you to identify your ‘A’ clients.
So, who are Type A clients? They are the clients that are profitable to work with, they love what you do and how you do it and they have a cultural match with you. They never haggle about price, but they do keep you honest by expecting good quality products or services. They also want a lifelong relationship with you. Strangely enough, the time it takes to get these types of clients is often less than the time taken to get C&D type clients!
When you make room for profitable clients, you also have time to do the marketing that is required to stake your claim as the expert you are in your field!
Clue 3: You haven’t raised your prices in 12 months
Even Government services have CPI increases! If you haven’t raised your prices in 12 months, then it’s important to do so now. Ideally, to make it easy, you should raise your prices at the beginning of each financial year. If you want to increase by an amount larger than 10%, make sure that you phase it in over several price rises. If people start to object, refocus them on the great value that you provide and that you are experts in what you do.
Clue 4: Your competitors are more expensive than you
This is not good! You should always set your pricing at mid-pack and higher. If you are competing solely on price, then you are not confident about the products or services that you offer. You need to be establishing yourself as the best of the pack and refocusing potential clients or customers on what you do differently to everyone else. Establish a Unique Service Proposition that none of your competitors do.
Clue 5: Your clients are all price sensitive
This is a big one! Your focus should be on having a business with a point of difference other than price. Otherwise the type of customer you attract will always be price sensitive and will leave you the minute that you aren’t the cheapest. Look at ways in which you can increase your value add with free services or gifts that don’t cost you anything. Think creatively about what people really want when they do business with you. If in doubt, ask them!
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