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.
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Comments:
I love this site. As a small business owner, I often think I know it all. This is refreshing stream of information! Thanks!
hope the year 2012 will give some good news to the market
great write-upYou must proceed your producing.Best regards
as the negative threats all over the world the market is not at the bullish side from that perspective the price rise and failing are effecting to much
Not sure how painless any price increase is. Even when customers understand the economic realities and the need for the increase, the reaction will not be positive. Human nature. But having said that, it's always helpful to use strategies that make them feel as though your doing your best to be on their side. The description of the first strategy "Phase it In" is a good example.
I work with a lot of service providers so what I tell them is to offer Packages instead of charging by the hour. They know how long it takes to get a result so they package their services and can charge more. Also, it works to have a low cost to you, but of high value to your customer bonus. I offer access to recordings of webinars and people have told me they sometimes buy me to get the free offer (4 hours of recording) I have notices a lot of "resizing" going on in the retail chains. Candy companies used to do this all the time as chocolate and sugar prices varied. A half gallon of ice cream isn't a half gallon any more. A pound of bacon is sometimes 14 ounces and the old 24 package of Diet Coke is now only 20 cans! Warm Regards Jim Aubele of BusinessMentors
Add Benefits that your Competitors are not , that will help cushion a price increase Then the benefits will be more of the Sell, than only the price.
Carol, I really agree that a price raise may be required. The economy seems to be heating up at the moment. Plus, in my work as an entrepreneurial consultant and coach, I estimate about 90% of my entrepreneurial clients are undercharging for their services and leaving money on the table that should be in their pocket. I particularly like your suggestion of letting clients know ahead of time that prices are going up. I love it for two reasons: 1. It comes from a good place. You are giving your cherished clients a heads up that if they act fast they can still get a great deal. 2. It can create a very healthy rush of sales for you when you need additional cash flow fast. This is because clients often need a motivator, like a time limit to take action.
Engrish, prease?
course any company would want to raise prices of their products according to rising raw materials, wages, and others. But what about the competition that exists, not all productswho refreshed and in combination can also achieve good sales, all the parts that you tellwe've ever done, to date, and the future we try to make the price go up in stages, givingopportunities price order old , and gives the target a model to be additional discounts andbonuses, and we try, hopefully can get good results.