PricetagI’m going to talk about a taboo subject today:  raising your prices.

There’s an incredible amount of fear and angst in this area:

  • “The products aren’t worth it”
  • “We’ll lose our customers”
  • “People are still pinching pennies”
  • “People will think we’re ripping them off”
  • “Our competitors will have a field day”

I’d be the last person to propose that you take advantage of your customers and lose their respect.  But here’s the interesting thing:  In most industries, customers want to know that you’re going to be able to survive.  And if you’re losing money, you won’t be around for much longer.

Raising prices should be a part of the tools you have, along with getting more customers, lowering your costs of doing business, and creating new products.  Each tool in the box has its own purpose, and an appropriate time for its use.

When should you think about raising the price for a product?

  • People are drawn to the product because it’s special and valuable.
  • The competition is raising its prices.
  • You’re losing money on each one you sell, but not making that up by the sales it’s driving for other products.
  • The general market expectation for pricing is increasing in that area.

For many situations, it’s not reasonable to do an upward price adjustment with no warning.  Just the shock itself may cause customers to look at the competition.  So in this situation, you want to look at the planning cycle:

  • Is there a way to reduce the shock for your most loyal customers, perhaps by honoring the lower rate for a period of time?
  • Is there a market event that you can tie it to, like the introduction of new model years for cars?
  • Can you do a price increase by offering a new higher-value product, and focusing on driving people to that?
  • Can you ease the pain for people who are higher-volume buyers?

Here’s the advice:  At least look at it.  You may well decide that this isn’t the right time, or that the risks are too high.  But don’t avoid the decision just because of vague fears.