Nobody really wants to face putting their prices up when you’re knee deep in a troubled economy or they haven’t had good sales year themselves.
It’s risky business! You risk alienating customers you already can’t afford to loose, you also leave yourself vulnerable to competitor price jousting or in heavy retail – price wars and finally you tend to upset your suppliers a quite a bit – because they’re the guys you’re going to be pressurizing to sharpen their pencil to come to the party on their pricing and they might end up walking away from the relationship with you too – leaving you vulnerable and in search of new service or product providers.
All in all – not pleasant – but very necessary for survival.
So what do you do? How do you manage a price increase from a company marketing point of view without doing permanent damage to your brand and customer relationships?
Let’s be honest – you’re always going to have operational costs in getting the finished product to stores – be it brick and mortar or digitally. Cutting corners doesn’t work – it leads to inferior quality product or service and you end up with more egg on your face than you want or need. Location and distribution logistics add to the raising costs – margins are squeezed on both ends and leads for tenuous annual negations.
So what to do?
In my humble opinion I would keep it real. No smoke and mirrors. Transparency is key.
Also, resist the urge reduce your promotions – cutting your promotions will damage your relationships, reduce your shelf space and ultimately your jeopardize your listings and exposure.
Educate the Customer
Tell the customer that your prices are going up on said date.
Tell them why you’ve had to increase the prices. Is it due to the current drought? Is it because of an increase in the price of ingredients or is it due to the soaring transportation and distribution costs? Be honest. Consumers are smart and want to be treated as such.
If the your price increase is fair and you’ve shown your customers that you’re not running a racket on them – you’ll understand and appreciate your honesty.
Choose the right products for the a price increase
New product ranges – flavours or varietals, larger sizes or improved packaging – all justify a price increase. Staple – entry level products should – where possible have a reduced percentage price increase – this is your mass market product and a staple in the home. Margins are usually tight here anyway and in my experience this area is a price sensitive market. One also is very easily caught in a price war against competitors so keep your price relative to the market’s needs. A luxury or premium product | service has more lee-way and is able to sustain a justifiable price increase as long as one doesn’t compromise on quality. Remember here the customer is educated and spoilt for choice and can vote with their wallet – so keep it reasonable.
Timing is key
It’s better to increase the price when you’re improving the experience. Be it a new size, better package or new varietal. A new product usually translates to an improved experience. Remember here to communicate new product or service’s features and benefits or added experience – the customer will join the dots. Improved experience = increased price.
Review your current stock or bookings – is the market flooded with old packaging or old service brochures? Run a promotion to clear old stock and call it just that – a stock clearance. Everyone understands the need to update stock – they expect it for topicality and freshness.
Review your competitors – what are they doing? Do you all increase your prices all at once – are you the only one increasing your prices? Make sure you have your ear to the floor and can hear when the big five go on a stampede. You don’t want to be trampled as all your loyal customers leave you or the ‘better priced competitor’. If you’re in an industry that is regulated – ensure that you’re in on all the negotiations and top level discussions or at the very least informed. No surprises!
If you’re not a market leader and taking the heat up front – look and learn from the trailblazers – what are they doing? How are they treating it – what’s worked, what hasn’t – you don’t have to pay all your school-fees all at once – sometimes you get to bank yours when you learn from those closest to you in the market. Some retailers have a great philosophy of watching to see what a product will do in the market before listing it – if it fails it doesn’t fail in their stores upsetting their customers and the chaps taking the risk gets to learn the hard lessons. The shoe does often change feet – in other words the other guys do get their own lessons – maybe just not as expensive as the bigger guys!
Keep a tight handle on your data
Who busy on promotion? Who spend all year around? You should have this information at your finger tips and react to any changes in the data. The data could be affected by price increases, promotions, location or anything for that matter – but we’re talking about price increases here – so if you notice that purchasing habits drop straight after a promotion – review that segment over a 3 year period and learn from the trends. What isn’t working? Why? What can you do to turn it around? Data is king especially in a price sensitive market – peaks and valleys in sales data will empower you to make great communication and marketing decisions.
Review your sizing | Packaging | adding value
You need to increase pricing? Have you considered offering a reduced size? Or think about offering a different packaging material or packaging concept – instead of bottled – have you considered tinned? Instead of tinned consider foil packed. Consider offering an added value bonus to your product or service that softens the blow of the price increase. Do a co-operative deal – include a movie ticket or a free mani or pedi with every item purchased. For example if your ideal target audience was a book club – consider offering them a book store voucher with every case of wine purchased. It’s all about adding value and surprising and delighting your customer…
Remember – you don’t want to upset the customer – they mustn’t ever feel like they’re on the other end of your enforced annual price increase…they don’t need to know about that – that’s your own operational issue. Everything you communicate must be for the benefit of the consumer. Clearing old stock; launching 2017’s new product range or introducing our new improved packages for 2017 – new varietals, new sizing, new time slots…it all needs to be based on what you know your consumer wants from you.
Finally – we all understand that prices can’t stay the same for ever. Everyone get’s it – life’s getting more and more expensive – it’s how you communicate it and how you make a difference in your consumer’s life by adding value in answer to the increased pricing that separates you from the ‘shysters’ or ‘bad experiences’ out there in the consumers mind.
As an aside – this blog doesn’t address discounting, special deals and price promotions – because that is a topic that requires it’s own detailed blog. Thanks. Drop me a line on if you want to engage on my blog – firstname.lastname@example.org