Whether you are a doctor charging fees for house calls, or a manufacturer selling cars, your own costs are always likely to increase, pushing you to increase fees or prices that you charge to customers. However, there is a right way to handle customers when you increase prices.
Packaged Communication for Price Hikes
Any communication about price hikes to your faithful customers should be gift-wrapped in sweet but straightforward words. Something like, “For the past 7 years ABC manufacturing has held its prices steady while always improving our quality and service. We are proud that after these many years we are limiting our price increase to a modest 3%.”
You should be able to convince your customers through your communication, whether it’s a letter or email, that your price hikes are fair.
Charging for Add-Ons
Charging for the extra benefits to customers is another way to tackle a price increase. A courier company can charge extra for promising to deliver consignments within 20 hours instead of the normal 24 hours. Efficient courier companies usually deliver within 20 hours but play it safe by advertising delivery within 24. Working towards such strategies does not add to your costs.
Market Segments
Price hikes can be given shape through a careful consideration of market segments. There are always certain market segments which are affected more by price hikes than others. A business traveler won’t mind paying extra for a more expensive same-day return flight to Miami; however, a housewife would not always want to spend those extra dollars.
Different market segments react differently to price hikes. Hence, price strategies should be calculated according to the diversity of market segments.
Price hikes should be dealt with by being straightforward and bold. Your customers are not interested in your profit margins; they are concerned about value for their money.
Some researchers have even suggested that some people may hold you in greater esteem if your products look expensive!
Handling Prices during a Recession
It has been noted that a recession forces retailers to lower prices in order to sell more. Recent articles in the New York Times about Starbucks selling coffee for a dollar per cup shed some light on the fear faced by businesses in the U.S.
However, critics say that it is wise to stick to your prices. They contend that though it is easy to lower prices during a recession, raising prices becomes difficult when the economy turns around.
When deciding on a re-pricing of your products, you should consider whether your brand is price sensitive or not. High-end or luxury brands may damage their images by reducing prices. The tighter people are with their cash, the more they look to spend on trusted brands only. Hence, brand image becomes all the more important.
Accordingly, during a recession one should look to protecting one’s brand by holding steady with the prices.
