Updated: Apr 8, 2020
Raising prices is typically a scary topic for small business owners. The biggest fear when it comes to raising prices is losing current customers or clients. What small business owners have to understand is that losing and gaining clients is all a part of being in business.
Businesses have to raise prices for many reasons. Overtime the cost of products and the day-to-day expenses to run your business will increase. Also, when a business want to increase the value of a service or provide a new product to their current clientele and new clients may cause a business to reevaluate their price structure. These are just a few factors that can cause a business to have to increase their rates on services and products.
From a business perspective, price increase objectives typically directly relates to turning a profit, being able to build more business capital to expand the business, provide better products or services to its customers, implement new systems and more. Therefore, when you are considering to raise your prices for your business be sure to outline the objectives of your price increase.
Here are three methods you use to raise your prices.
Increase price of services or products due to price inflation(s) imposed on the business. For example your company has a annual rent increase, the price of your product purchases have risen. It’s just buisness, so when price increase happen to the business, the business have to raise its prices. How and when the prices are raised are solely up to each individual business.
Increase price and increase the value of your product or service. When a company increase price and the value for what they are offering and then convey that to customers through their marketing and advertisements, customers usually receive the price adjustment better. The increase in value might not always come with the actual product, if it’s a product, but the increase in value may be in the customer experience. For example, grocery stores decided on creating self check out lines to help decrease the waiting experience. Another example is Chick-fil-a utilized more of its employees in the drive-thru line to take orders on hand held cash registers (I.e. iPads) to help improve its excessively long drive-thru lines. They also added car porches with heat and air systems to ensure their employees remain cool in summer and heat during the winter while serving the customers.
Decrease value and keep the price. This is a price tactic that stores like Dollar Tree typically uses to keep everything at $1. Through the years if you have been paying attention to the well known brand products that are offered at Dollar Tree like Kraft, Hunts, etc the sizes of the products have gone larger sizes to the smaller sizes we see today. (See video/photo). In the beauty industry the $50 sew-ins was birthed through a decreasing value pricing structure. The $50 weave removed the shampooing, conditioning and blow drying process fro, the service. It also removed smaller braiding patterns for the sew-in base, the process of single sewing each track, cutting, and styling. All the removed services could be added but in an “a la carte” way.