The business manual to successful price adjustments
The product line and service pricing do not come easy. It involves a series of difficult decisions. You must back them up with elaborate research, hard work, and a strong awareness of where your business stands. Price changes are of vital significance since they impact your client base, brand persona, and, most importantly, your revenue. Notably, product line pricing that categorizes different products based on their cost and quality is highly important. It creates a certain hierarchy of quality in the minds of the consumers.
Having a small business, it’s incredibly vital to find the right time and way to proceed to all the possible changes in your pricing list. So, we’ve assembled all the possible parameters for a smooth reorganization of your prices.
When should you review your charging strategy and make the right price adjustments?
There are different cases in which companies should rethink their prices and make the necessary changes. Here are the six times that you should or could experiment with your price list. Most likely, you will think of price adjustments when…
… higher taxes knock on your door.
During periods of inflation, generally, the average prices go up due to higher taxes, amongst other reasons that will be analyzed in this article. Hence, your company has to readjust the prices as well in order to stay competitive. In every market, there are times that there is an upheaval when companies up their games. However, all companies should rethink their pricing plans in order to stay on the radar.
… your costs change drastically.
If you manufacture your own products and your materials costs have risen, you need to raise your prices to gain more profit. Your services may have also become much more demanding and expensive to fulfill timewise. This suggests that you need new additions in your workforce, a decision that brings extra internals costs. Subsequently, this implies a rise in prices. Of course, this scenario works both ways. Thus, if you have found ways to minimize your costs or offer your services with less preparation, your prices can go down.
However, your costs may have increased but not your profit. If yes, you’re experiencing the unfortunate case of increased sales without the respective amount of revenue. This problem deserves your attention and a closer look at the logistic costs of your operations.
A great example of necessary raises is Netflix’s new prices in early 2019. According to cnbn.com, the financial need for the production of original content causes an increase in prices, between 13% and 18%. So, their highest jump in rates so far has been justified, and no loss in the number of subscribers has been observed.
…your products/services are always on offer.
Τhis occurrence appears to be the trickiest one since it means that you have failed to market the price list of your services/products properly. So, you need to put them on sale. Either because your prices are too high or because you haven’t found the ideal balance between expensive and cheap.
A total revamp of your pricing model is in order. You need to find the right prices so that your client base agrees to pay, but you also make a steady amount of money for your company to remain sustainable. Meanwhile, the above situation can help you avoid instances of unmanageable demand and supply shortcomings.
…you have a stable client base and a well-built brand reputation.
Sometimes, a price increase is not a necessity due to practical reasons but a business strategy. Companies that have a very devoted following can experiment with their prices, especially when they want to guide customers towards specific high-value products or to reinforce their brand persona.
Take, for example, Starbucks and its pricing changes. As a company, Starbucks has shifted its attention towards creating an experience for its customers and not selling plain coffee. This allows Starbucks to increase revenue while at the same time, it builds a high-class audience that follows the hype. It’s all about the right promotion and audience management.
However, even companies like Starbucks should not overestimate their powers since, in 2018, their price list increase had people rolling their eyes with discontent. The reason was and still is to this day that the latest reasons for the price raises are not satisfactory enough for the average consumer.
…your services/products sell out, but you stay behind.
In a scenario that a company that has a pretty appealing product/ service to offer, people will gather around. Unfortunately, it’s highly possible that a company may not have all the resources, customer service, and the needed preparation to deliver the goods to the incoming volumes of customers. This outcome could bring about negative advertising for the company since they cannot live up to their promises. A very smart move to control your sales would be to raise your prices in order to decrease the flow of buyers.
…the time is right.
The question “How do you price your services/products?” cannot be answered simply. It depends on how much you want to increase or decrease your prices and why. If you intend to lower your prices, it’s always better if you trumpet it to everyone. Customers will definitely be attracted, especially if you haven’t reduced the quality of your work.
If a price raise is in the plans for you, then you should avoid making it public during a quiet period. Instead, blend it with a celebration like Christmas or Easter. This way, people will appreciate the update on your product/ service without focusing on the price thanks to the holiday spirit.
How to implement your price adjustment plans in your current price list?
After you’ve detected the reason you proceed with changes in your product line or service pricing, you need to decide on how to achieve a smooth introduction of the price adjustments being an increase or decrease.
Do your homework
First and foremost, you cannot move forth without doing market research to see how other companies manage their product line pricing and how audiences respond to them. So, take some time to check out the price lists in your industry and the trends that circulate around. Research will give you a lot of valuable information about the pricing strategies that other companies follow and the ways that companies choose to reveal and advertise their pricing adjustments to their audiences.
Make value-based price adjustments
The fairest kinds of price changes are the ones that seem most logical. Unjustifiable sudden price raises do not really have a positive effect on your clientele. The relation between value and price should be analogous so that new advancements should be paired with a new price. After all, your added features and innovations should be rewarded with rates that correspond to the struggle backstage. Product line pricing adjustments should clearly show that the different tiers of product prices offer features, not to be found elsewhere or too helpful to charge less for them.
Communicate with your customers
Your customers are to your company what fan clubs are to pop stars. So, you need to actually consider their views. They won’t dictate your decision, but they can provide valuable feedback. For example, if you’re planning to raise your prices considerably due to the introduction of new features, you should be sure that your clientele is loyal enough to go along with it.
At the same time, if you have already decided on the price adjustments, then make sure they are for the right reasons. Of course, you should always remember to get your existing customers on board with heads-up emails, special prices as well as a good explanation for the change.
Plan your changes well, design them even better
It’s pivotal for any change to be based on careful planning. This way, you have more chances to avoid unpleasant surprises as well as deal with negative backlash with grace. However, great designs can mesmerize and communicate your points better than anything else. So, think carefully about how to present the price adjustments visually.
Your goal is to make people focus on the great stuff you’re offering, your impeccable style, and your unique approach to your craft. A really cool example of a fun and interesting way to present your pricing, as well as your pricing adjustments, is TunnelBear.
All in all, product line and service pricing is a tricky business. So, your mission as a businessperson is to find the right reasons, the ideal timing, and the most suitable way to present your product updates and the respective price adjustments.