Many of you might be thinking about price increases these days, so I thought I’d provide some guidelines that I’ve used through six businesses.
1. Know where your pricing is relative to the competition. For example, one of my clients recently raised his support fees 50%, but he could do it because he’s still about a third below his competition. And he did it only on new customers, not his existing customers.
2. Do you really need to raise prices? And if so, on which customers? Maybe you have a group of customers that have low prices and demand more service of you….these folks are the obvious choice for an increase.
3. If your projected increase is 10% or more, break it up into two or three segments. This approach avoids sticker shock, and will let you know if your competitors follow suit.
4. Don’t be afraid to raise prices. One of our software clients has raised his prices unapologetically 4-6% a year for the last 10 years, and he hasn’t lost any more clients than he would normally.
5. How are you going to justify the increase to your customers? Oil prices? Commodity prices? Those are about the only things going up at the moment, and if you can’t make a legitimate claim to have suffered because of these two items, think twice. Otherwise, your customers might think that you’re gouging them.
6. Don’t show up for price negotiations in your Porsche or Ferrari (true story). Increases aren’t too believable. Drive your beater.
6. The worth or your products or services is never measured by price….it’s the value perception.
So, these are just a few guidelines…..use them in good health!