Five Painless Ways to Raise Prices this Year
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It may sound odd, but small businesses are increasingly handing out pay raises. Unless they're crazy, those business owners probably also plan to either simply sell more units or raise their prices in the coming year to cover that added payroll cost.
Apparently, the pay-raise trend is pretty widespread. A Pepperdine University/Dun & Bradstreet Credibility Corp. study showed 43 percent of small businesses have already hiked worker pay in the past year, and 42 percent said they plan to raise pay this year. Many workers have no doubt gone several years since 2008 without a raise, and we're at the point where loyal employees who've stuck around need to be rewarded to keep them on board.
This may be a critical time to raise prices for many businesses in any case, as prices are rising or remaining high for many basic materials.
With the economy still so uncooperative, how can you sell customers on a price hike? Here are five ideas:
- Phase it in. Let customers know prices are going up next month, or next quarter. Drive some extra sales volume now, and then the party's over and the new price goes into effect. Give clients a chance to buy in volume ahead of time to save money. It feels like a deal, but, sooner or later, customers still end up paying the new price. Personally, I like to give notice of a price hike for my writing business about six weeks before it takes effect, so clients have time to adjust to the idea.
Related: More Small Businesses Plan to Push Up Prices in 2012
- Offer valued-customer discounts. Take a page from grocery stores and offer one price for your loyal frequent shoppers, and a higher one for occasional users. That way you can start grossing more without alienating your core customer base. Don't make those customers haul around a loyalty card, either -- keep the information on who gets the good prices on file yourself.
- Revamp or repackage old products or services. Add new features, bundle existing products to create a new one or redesign your packaging. Freshen it up, and you've added value -- or at least created the appearance of added value -- and can command a better price for it.
- Introduce new products. One of the biggest problems in retail is the lack of unique products. What can you sell that your competitors don't? Add fresh items that can't be easily price compared and you can charge a better markup on them.
Related: Four Rules for Pricing Products
- Review and retool your product assortment. Do you know which of your products has the lowest margins, and which has the highest? If not, find out. Then drop slower-moving, low-net products and add more high-end ones. Also review competitors' pricing to see whether some products are priced unnecessarily low. Small, strategic increases on a few popular items can add up quickly, while customers may barely notice the difference.
Will you raise prices in 2012? Leave a comment and tell us how you will roll out your price hike.