For those of us who have our own businesses or work in corporate America, the idea of a price increase isn’t new. In fact, annual price increases are one of the fastest ways for you to earn a few extra dollars to improve margins and cover growing costs.
Price increases can negatively impact the sales and marketing efforts for today’s busy marketing professional. A price increase on products or services that haven’t changed creates a difficult scenario for current customers familiar with a lower cost. This is especially true when we hear objections from our customers expressing their dissatisfaction. With few or literally no changes to a given product overcoming objections is difficult.
A key concern among marketing professionals is that customers will quickly move to a competitors product as soon as they hear the words price increase. This is especially true in markets where your competitor has a similarly priced product. There is always someone else that your customer can buy from. The good news however is that few customers migrate because of price increases.
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.
Your customers, and all consumers for that matter, have been conditioned to find the lowest price possible for any given product or service. When rolling out a price increase, customers do not want to pay full price. This is why they continue to ask for discounts even after a price increase has been put into affect.
Here are some ways to overcome objections related to price increases:
Add value that is greater than or equal to your price increase. Customers do not want to pay more for the same old thing. When they do, their perception of value diminishes. Provide additional services, support, or terms to deliver additional value that is substantiated by price.
Evaluate the cost for your customer to switch. This consideration has always been popular among phone companies. They not only want to sell more to existing customers, but they also want to attract new ones. You must be able to explain to your customer what costs he will incur if he changes providers. These costs may be both financial as well as emotional. How much time, energy, and resources will it take to truly switch?
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.
The final bit of advice I can give around price increases is that you should really understand your competition and what types of alternatives are available to your customer.
If you have a stronger package at a better price than you competitors, switching is not an issue. If your offering is less valuable and more expensive, then perhaps you need to reevaluate your pricing. As a marketer, your job is to create a perception of value or remedy for a given need. Identify that need and focus your messaging on meeting that need. When you do, price is rarely an issue.