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Getting Away With Raising Prices

If there’s one thing that defies the law of gravity, it’s price. Year after year, inflation pushes up costs to a greater or lesser degree depending upon the industry and its location. Obviously, others are raising prices – so why do you get all worked up at the thought of following suit?

If your business is competing on price alone, sooner or later, some rival will undercut you. Being the cheapest in the business is not a sustainable USP and doesn’t make a great business model either. If your business has teeth and customers see value in your product or service, raising prices is not going to sound a death knell.

Sooner or later, you will have to raise prices, if you hope to survive. Here are some tips on how you can put your business in the best position to do so.

Differentiate. Make sure that your product is perceived in some way as being different from your competitor down the road. The emphasis is on the word “perceived” – a difference is equal to none if the consumer doesn’t pick it up.

If you manage to set yourself apart, you will own a part of the consumers’ mindshare and consequently, a specific niche in the market. When you gain customer loyalty, you will find that the demand for your product will not fluctuate with price.

Deliver value, not price. Most consumers are looking to maximise bang for their buck, which is very different from seeking out the lowest possible price. If you can demonstrate that your company offers the largest bouquet of benefits for what it charges, price will become a non-issue.

Find the right audience. Don’t waste time chasing a large number of consumers for your entry level product range. It’s a fact that in general, 80% of revenue comes from 20% of customers. Invest in developing those products that deliver high margins and profitability. As you go higher up the value chain, the consumer becomes less fickle.

Build relationships. That is what draws your customers back to you time after time. Even if you have a good product, top it up with exceptional service. Show your customers that you value them. You’d be amazed at how many people are willing to pay for good customer service.

Time it well. Dragging your feet on a price hike decision may not gain you any advantage. If the competition is raising prices, follow suit. It is best to increase rates at a time when the market is in inflationary mode, rather than wait for a while and then stand out for being the only one to do so.

The decision of raising prices is not a simple one – and most business owners and their sales staff are loath to do it. But it needs to be taken at some time or the other. Handled right, it may not hurt at all.

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About the Author:
Hi, I'm Akhil Shahani, a serial entrepreneur who wants to help you succeed. If you like to work smart, check out http://www.SmartEntrepreneur.net . It's full of articles and resources to help you start and grow your business successfully. Please visit us & download our special "Freebie of The Month" at http://www.smartentrepreneur.net/freebie-of-the-month.html

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