Episode 193 - It's Time to Raise Prices

Introduction

Small business owners in the customization industry are facing unprecedented challenges due to rising prices. This resource guide provides practical strategies to help your business thrive in a changing economic landscape.

Market Research and Competitive Analysis

• Research competitors and trends - Price shop around and see how you REALLY are in the market. Also ask about 'hidden' fees. Set up fees, art fees, delivery, etc.
  • Do you have a fee to set up my logo?
  • Do you deliver or do I pick up? Fees?
  • I am trying to budget this all out, what other costs should I expect to make sure I allocate the right money?
• Understand customer perception - ask other business owners you know if they have had price increases. How did they deal with them? How large were they?
• Define your pricing strategy
  • Do you want to be the price leader?

Keeping it Simple

• Avoid complex financial details.
  • Don’t break down the cost of your ink, paper, deliveries etc. This leaves room for holes in your pricing strategy. Just keep it simple - 'my costs are up, my retail is up'
• Offer added value.
• Confident price change communication.

Transparency Matters

• Be open about price increases.
• Consequences of non-transparency.
  • If you try to dance around the truth customers may see this as dishonesty
  • Insights from Harvard Business Review.
    • "Call the action a price increase, not a price adjustment, a price change, or another euphemism. While this may seem like a small thing, euphemistic messaging can cause serious harm, fraying the relationship with loyal customers." Many consumers are keenly aware of overall economic conditions, so when you tell your customers you’re raising prices, it just confirms their expectations, and most accept it.
• Use clear language.
• Postpone price increase for certain customers - let them know it’s coming, and why you are postponing for them.

Customer Satisfaction is #1

• Prioritize customer satisfaction first.
• Satisfied customers accept higher prices.
• Price-sensitive customers are likely to stay if satisfied. If they still won’t stay with higher prices, you have to decide if they are worth it.
  • e.g. a low maintenance customer may be worth keeping at a lower margin. However a customer that is constant trouble, no referrals, frequent returns, frequent complaints… might not be worth it.

Additional Pricing Strategies

• Target new customers - Go after more unique niches or higher end customers
• Offer contract discounts - Can you get customers to commit to months or a year of service. e.g. make updated uniforms for their business every season, or update signs on storefront for each holiday.
• Create bundles - price of shirts is up, but if you do shirts AND hats you get a discount.
• Selective price increases - only price increase certain items. Maybe your low-price leading items stay the same, but your upsells increase.

Handling Customer Objections

• Address objections with confidence
• Brainstorm with your team or other business owners
• Practice the conversations
• Understand most customers will understand why this is happening

Conclusion
You empower your business when you control your prices. If you are racing to the bottom or let fear control your pricing, you will eventually start suffering consequences. Increasing pricing doesn't mean you are greedy, you are doing your best to stay in business and reach your financial goals.