With the loosening of pandemic restrictions, the economy is booming across the world. This has led to certain material and labour prices increasing due to shortages and also customer demand.
But, what happens when a customer arrives at your shop or website and notices the price has gone up on her favourite product? Before deciding whether to buy it, she will be wondering why the price has increased. You’ll need to be prepared for her question.
There are many reasons why businesses increase the prices of their products and services periodically:
– Increase in business costs (Materials, Labour, Tax, Electricity, etc)
– Operating less hours but wanting to earn the same
– To gain recognition
– Selling to retailers
– Repositioning stance in marketplace
– To earn more and become profitable
– Product has improved
– Growth of population
– Increase in money supply
– Lack of supply or production
1. Be transparent and inform your customers by giving them a call or publishing announcements to prevent a misunderstanding. Always include details like the previous price and percentage increase to ensure customers make an informed decision.
2. Marketing materials should be updated to suit the new conditions. Also, since new strategies may be necessary, they should also be discussed and agreed upon by all internal and external parties that may be affected by the changes.
3. Give your customers rational explanations for price increases. Your explanation should align with the company’s goal to provide the same or better version of the product or service. This builds trust and understanding that you are merely responding to the market environment and not only chasing undue profit.
4. When communicating about a price increase to the public, make an exception for your existing long-term clients. You can give a lesser rate of increase for them or allow them to purchase at the original price. This may sound biased but they are your loyal clients and deserve to be rewarded and treated exclusively.
5. When increasing the price of a product or service, the value of it should be increased too, such as a free gift or 20g addition to a 300g pack.
1. Maintain a balance between maximising the value you provide and maintaining your company’s momentum. The right pricing structure needs a calculation taken from the constant analysis of the two.
2. During testing, two indicators should be assessed: price sensitivity from A/B Tests and data that underlies intention to deliver a strong price ratio in the market.
3. It may be necessary to run up to 10 A/B tests to settle for the right pricing and packaging for customers.