Your prices and pricing strategy, in particular, needs to be reviewed regularly. You need to establish prices for your varied customer groups as well as your “special customers” so that your company is maximizing its overall profit margins.
First, the review of your selling prices and margins is mandatory. A daily review of the Oneir Solutions New Order Reports as well as the Sales & Gross Margin Reports can provide opportunities to identify trends in your profit margin and profitability. Also through the Customer Sales Analysis Reporting you can analysis profitability and margins for your varied customer groups. This should allow you to identify opportunities to either increase or decrease pricing.
Price reductions are easy. No one ever objects to those. It’s price increases that get your customers’ attention….so let’s try to minimize the negative impact from increasing your prices for your goods and services.
For billionaire investor Warren Buffett, the most important thing he looks for in a business is “pricing power”.
“If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business,” he says. The good news is that, to a certain extent, pricing power can be acquired. There are strategies you can use to minimize the impact of price hikes on your customers, and ensure that they stay with you.
Recently we had to raise our prices for the Customer Support Plans; something that hasn’t happened in seven years. But before announcing the price increase, we wanted to get other companies strategies to soften the blow. Where to go for input…Of course we consulted the internet to get the experience of others. Here’s a guide to communicating price changes to your customers in a way that makes them easier to understand and most importantly, to accept.
- Explain But Don’t Apologize
It is important to validate the price increase. Be positive and show your customers why the increase is fair and justified.
As with all bad news, you may be tempted not to mention it at all, in the hope people won’t notice…but as we all know, they will! So be open, be honest and don’t apologies.
Some businesses are not expected to make a big splashy price increase announcement. For example, fast food chains that simply display the new pricing on their menu boards. But even the fast food retailers has to take action to minimize the impact from their customers’ “silent protest” when they find the increase too excessive and simply take their business somewhere else.
- Detail Your Value Proposition
While some customers are very price-sensitive, most people don’t buy solely on price. Many will stay with you if they value your products and their relationship with you.
Remind your customers why they first purchased your goods and services. Also re-enforce their reasons for continuing with your company by outlining new benefits your products provide…as well as the core value proposition your company brings to your customers.
- Customers Loyalty Is Tied To Perceived Value Received
You should constantly look for opportunities to add value to your products…as well as to your core “value proposition”. Some improvements just add to your competitive advantage, while others can have associated price increases.
Perhaps your newer products provide more value vis a vie those of your competition. Maybe you can add in a bonus service, or upgrade your product. You could introduce bulk discounts or provide alternative products with lower overall value. Throw in some extra support or services, such as a longer warranty period. These are all methods for providing a perceived value increase and justifying the new pricing. The key is to make your customers feel that they’re getting more than they did before.
- Be Prepared To Negotiate With Key Customers
Increasing prices is particularly difficult when it comes to your key customers. They are your bread and butter accounts, and losing them could be devastating. Before any public announcement, start with contacting key clients first. Meet with them in person so that it’s more personal and you can explain the changes and answer any questions they have.
You should expect this to be a negotiating process, so be prepared to delay their price increase or alternatively phase it in. You may also have to provide some extra services to ensure your on-going business relationship. But be firm! Remember that they need you as well.
- Study The Pros and Cons Of The Price Increase
Once the need to increase prices is identified, have a strategy in place to ensure everyone is on board. Before you decide on what new pricing is right for your products, involve all those concerned in the business from the sales team that need to feel comfortable communicating the price increase, to the financial group that will reflect on the business needs for the increases, and on to the manufacturing and purchasing groups that may be able to find ways and means to lessen the need for increase. Your trusted management team needs to develop the plan.
I was told once that a price increase greater than fifteen (15) percent is harder to accept than lesser increases…so keep this factor in your consideration.
- Effectively Communicate
Use social media, website forums, emails and newsletters (as Oneir did) to communicate the message. Open communication will help ensure things don’t get out of hand.
As we mentioned earlier, start by communicating with your key clients in advance of the general announcement. Try to do this in person.
Whether your communication is with key customers or your customer base in general, start by thanking them for their ongoing support. Then transition to the reasons why you need to raise your prices. Discuss why the products are worth more as well as the value your company brings to your customers’ success. Possibly add how using the additional funds they will be paying will provide value in the future. It’s all about the WIIFM…”What’s In It For Me!”
Then, before you make the announcement, you’ll need to communicate the price hike internally to ensure everyone within your company understands the change and is prepared to talk about it. It’s particularly important for your sales staff should be prepared to deliver the message of the new pricing structure positively. You might even want to give them some sample scripts to help them talk about the new price structure. Also make other staff aware of it. You never know who your customers will end up speaking to, and it’s important to be prepared.
Then you’ll need to make the general announcement, sending emails or letters to all your customers at once and perhaps posting on your blog if you have one.
Timing is essential. Give plenty of notice before the actual increase goes into effect. In our case we gave a 60 day notification. Allow customers the opportunity to plan for the change, and make alternative plans if they need to. People tend to get less upset about things that are happening far off in the future than they do about things happening right now.
Then be prepared to answer a lot of questions, both by email/phone and on social media. Some of the comments on Twitter or elsewhere may not seem like the sort of thing you want to engage with, but if you just leave them out there unanswered, you’ll not only make that customer feel ignored, but also give other people encouragement to jump in and share their own grievances.
Communicating with people clearly and promptly may not succeed in making everyone accept the new prices, but it will at least make them feel as if they’ve been treated fairly.
Next Steps
As you’ve seen, there are several ways to raise prices and minimize the impact on your customers. Clear communication is key, but it’s also important to offer people choices when talking about the value you offer. Be confident, not apologetic.
Nobody likes to talk about pricing, and it’s natural to be wary of telling your customers that prices are increasing. But there is no future if you’re making sales when you are simply “trading four quarters for a buck”.
___________________________
Sample Announcement Used By Oneir Solutions Inc.
Oneir Solutions Customer Support & Updated Plan Subscription Fee Increase
In random surveys, our customers regularly chose the Oneir Solutions support team to be one of the best in providing service. This reflects the fact that the Customer Support & Updates Plan (CSP) is all inclusive.
First there is our phone, fax and e-Mail access which is invaluable when you need an answer to any question or pressing issue.
This Plan also covers our Software Updates. Customers will have even more ways to make their businesses more competitive.
Oneir Solutions enhancements encompass three elements that:
- Broaden the selection of multiple sales channels so clients can make more sales and give better service to all customers.
- Provide more opportunity to make your business more streamlined…in other words, you can do more with less!
- Provide better tools to analyse growth opportunities and more time to focus on the future.
Our quality software products not only make your business more competitive now, but promise to keep you at the forefront of technology in the months and years to come. Even better, the next breakthrough of our Web/Mobile applications will allow customers to engage in business no matter where they are and with whatever appliance they have, such as Apple i-Pads, Android-based smart phones, Windows laptops or tablets. The technology will also provide a broader opportunity for seamless integration with other applications. Over the upcoming months, you will hear more about this development.
In order to serve you better in the future and maintain our high quality of service and support, Oneir Solutions will be increasing its CSP subscription fees for both our monthly subscribers as well as our annual subscribers.
The monthly subscription price will increase on March 1st, 2017 while the annual subscription fee will kick in on the Plan’s anniversary date.
But don’t panic! For most of you, this price increase will only be about a dollar a day…This nominal amount is very little considering Oneir Solutions has not had a CSP fee increase for over seven years.
The team at Oneir Solutions Inc values the strong relationships we have built and we strive to make your business more competitive in every way we can.
Contact [email protected] or telephone 877-322-3580 Ext 1, if you have any questions.
____________
We look forward to your thoughtful comments on our Twitter account.
