Prices Increase And Savvy Marketers Add Value
Each year, thousands of companies consistently raise prices to increase margins and offset growth in various costs. For anyone working in corporate America, you are quite familiar with this tactic. For marketers, rising costs are always a challenge.
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.
There are a number of reasons why customers do not jump ship so quickly. The bottom line is that switch has costs associated with it. These costs are both and emotional as well as financial.
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:
Increase the value of your product and raise the price. Doing so allows you to justify the price to your customers. This removes any type of obstacle associated with price increases that are simply a way to earn the company more money but provide no benefit to the consumer. Determine how you could provide additional services, support, or terms to support a price increase.
Focus on switching costs. If a customer has to leave you, there are direct and indirect costs associated with doing so. Make a list for yourself. By moving to a new vendor, does you customer have to pay a new fee of some sort? Will they lose money by canceling with you or your services? How much time and effort do they need to put into finding a new vendor?
Segment your price increase. Not all customer are equal so treat them differently to make the transition smooth and get the biggest bang for your buck.The truth of the matter is that your customers are different. Some have been doing business with you for a long time. Others are working with you for the first time. Your price increase should be reflective of the individuality of your customers.
The last piece of advice I can give anyone thinking about delivering price increases is to fully understand the competition and what types of alternatives are available to those you currently serve.
If your company offers a better package at an equal or more favorable price, the notion of losing droves of customers over a single price increase really is not an issue. If your offering is less valuable however then investments may need to be made to enhance the product or simply revisit pricing.
