Increasing your prices without alienating your loyal customers can be a tricky balancing act for small business owners. On the one hand, your reasons for needing more revenue can be reasonable and justified. On the other hand, you risk losing steady but budget-conscious shoppers.
Christina Gillick, a Farmersville, Texas-based web strategy consultant and copywriter, suggests these steps for raising your rates while minimizing customer defections.
1. Create a tiered pricing structure
Take one of your products and offer it three ways: a low-priced version with no extras, a medium-priced version that comes with your standard features, and a high-priced version with extras and bonuses. Then keep accurate stats on how each version sells and make adjustments accordingly. Customers who want only the low-end product may actually turn out to be more profitable, but test your assumptions.
2. Eliminate low-priced items gradually
See whether you can replace one of your modestly priced products with an alternative that fulfills the same need but which costs you less. "Find a more affordable supplier for your product or replace lower markup items for higher markup items," Gillick says.
Making your product more valuable to the customer can usually blunt any backlash when you raise the price. For example, Gillick says that you can enhance the perceived value of your product by making improvements, getting a notable endorsement, or highlighting hidden benefits.
4. Lock in a lower price for your existing customers
Before you increase prices for a product or service, give your longtime customers the option of locking in the current rate for a short period. It will demonstrate your commitment to them and minimize any bad feelings when the higher price kicks in.
5. Charge for other options
Many companies that have offered free shipping in the past can pick up additional revenue by eliminating that policy and charging for the service. A variation is to offer free shipping for items over a certain amount. You might find that customers will buy more than they expected in order to get the free shipping. Companies that provide services can charge more for rush jobs or expedited attention.
Giving customers different pricing options and adding genuine value to your products and services can often take the sting out of a justified price increase.
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