Know-How Exchange : Strategy

Ivy, your question reminded me of a recent MarketingProf article. Did you see it?

The Right Way (and the Wrong Way) to Increase Prices

I think you can use the price increase as a reason to contact your existing clients, as Randall says. The kicker is that you might leverage this upcoming event to drive some sales!

"Hurry! Prices are going up on March 1st!"

That sort of thing...

Shelley ;]

I think the gift idea would send the wrong message. It says, "I really hate to give you this bad news, but ..." and that's the wrong attitude.

If you're already offering a good value and the price increase is modest (so it's still perceived as being a good value), just raise the price. Period. If you're worried that you are not offering a good value, particularly at the new/higher price, then you better find a way to add some value before you kill your business with pricing.

Pricing is part of the marketing mix, and it has to be consistent with, and supportive of, your positioining. If you're positioned as an inexpensive alternative, then you need to be sure you ARE an inexpensive alternative. If you're positioned as being better than competition in a meaningful way, then your price SHOULD be premium.

Assuming you are offering a good value already and the price increase is single-digit (percentagewise), just increase the price -- no gifts or apologies. If you want to use the occasion to promote sales to existing customers before the increase, that's fine. But don't apologize for delivering great consumer value ... or people may start wondering if it's such a great value.

hi Ivy

great advices from experts. I agree with mgoodman's view that sending a apology will harm your business than good as that lowers the brand image.

You have not mentioned what kinda products you sell and how much price will you increase? What is your product positioning? are you premium or value-for-money? Pricing strategy and strategy to raise the price depends on all these. Its very difficult to understand what is the actual position of the product.

you have mentioned that u tested the price increase by adding the Tax in the price, But after you increase the price the TAX will be added on top of the new price, isnt it? that will make the price increase seem more than actual. so to give you solutions we need to have more information in this regard.

anyway, here are some assumptions and corresponding probable strategy, IMHO:

Assumption 1: Your product is Value-for-Money

Strategy: if price increase is by single digit percentage, then in this case, you can follow Shelly's idea. you can communicate to your existing customers about price increase in 60/90 days and have a brisk sales.

if the price increase is by double digit percentage, then you can also Run a Sales Promotion, No need to communicate the price increase, just declare a Sales Promotion in which anyone buying 1 product will get something FREE (may be gift you had in your mind, do the cost benefit analysis). The communication of this promotion may be made like this "This GIFT costs $10 in shop, but NOW you can have this GIFT free with purchase of every PRODUCT" or something like this. This will make the new price acceptable to the consumers, both existing and prospective.

Assumption 2: Your product is Premium

Strategy: You just increase the price, NO need to communicate the existing consumers as you said they can absorb more increase. Regarding the gift, you send that gift later on an occasion, like on 1st anniversary of your business or birthday of consumers (if you have a database).

also, just a wild idea, if possible tag the price increase implementation with the release of Inflation, Retail Index data at your locality.

hope this helps. pls share you opinion.

cheers!!

hi Ivy

from your last post i understand that your products, despite your unintentional efforts to price them cheap, are costlier than other big-name products.

and you have mentioned you make these on your own (is it hand-made??), thats a plus point. combining these two factors your products can be places as Premium priced, at to some extent. Yours seems like a Boutique, and probably hand made, that deserves a Premium, so make it :-)

so, since the price increase will be single digit, then i would suggest as earlier, Just increase the Price.

You can deliver the gifts to your clients on the occasion of 1st Anniversary of business stating "Thank YOu for Staying with Us" or something like that, like i said earlier.

hope that helps. best of luck.

cheers!!