Imagine you're driving down the road to fill some petrol.
As you get to the petrol station, you see the headlines on the newspaper, letting you know that petrol prices are likely to go up by 20 cents.
What do you do?
Fill just $10 worth of petrol in your tank?
Or do you fill the whole tank?
You know the answer, don't you?
You sure as hell filled up the tank to the brim, didn't you? Even if filling up your tank is not what you usually do.
But notice something?
The price of petrol hasn't gone up. It hasn't gone down either. Yet you deviated quite radically from your normal behaviour. In most cases, you almost never fill the tank except when you're headed for a long drive out of town. And here you are, making sure every darned droplet drips into your fuel tank.
Is every car owner headed out of town?
Because every car in that petrol station, and across the country, is mirroring your actions, based on a headline of prices going up, up and away.
Yet you're afraid to raise prices, aren't you?
You're afraid customers will leave. You're afraid you'll be out of business.
And even as you're afraid of raising your prices, look around you and see how silly that fear really is.
Look at real estate prices. Or prices on Ebay. Or the share market. In every case, the prices are not just going up, but the price rise is actually being announced.
Don't hide your price rise under a bushel
First, you need to know that you can quite easily increase prices by about 10% without customers complaining, or leaving in droves. Only price-sensitive customers will leave.
Incidentally, price-sensitive customers are also the most painful to deal with. So let's just assume you're actually going to increase your prices by 10%.
When you decide to increase your prices, don't be a scaredy cat. Make a big deal about price rises. Announce that your prices are going to rise. And here are three specific reasons why you'll end up a winner.
Reason 1: Announcement of rising prices causes an urgency factor
Even the laziest, most reluctant customer starts to act ‘rapidement', when faced with an almost definite loss. An announcement of rising prices, is like lighting a fire under the customer's you-know-what, and forces the customer to take a decision immediately, or face the consequences.
Our brains are embedded with a need for gain, and to avoid loss. So as customers, we shake off our laziness and procrastination, to make sure we get more bang for our buck.
Reason 2: Your Products/Services Increase In Value
You remember what your mama told you: You get what you pay for. And somehow, those words have percolated deep into our brains. So as customers, we associate higher prices with better quality. When we buy products, we assume that the more expensive product will be superior than the cheaper product.
When we buy services, we presume that the supplier of the services is superior (and has plenty of business) if they're able to charge more.
Reason 3: Price Rises Gives You A Reason To Contact Customers
In most cases, you have little or no news to give your customer. Well, a price rise is prettttty big news. It has urgency, flavour and packs a lot of attention. Existing customers (and even prospects) are more receptive to an announcement of a price rise.
Because in effect, you're looking after the interests of the customer, and saving them time, money and frustration.
Remember, it's the announcement that counts … not the price rise itself!
The price rise is ho-hum. The announcement is really what counts. Even if you're dealing with generic products, you can justify higher prices by using the yes-yes factor.
If you're dealing with services, you've got to bundle your offer, and then increase the prices (Eg: Training events where the prices go up after the early bird offer)
If you don't believe that announcements of price rises work, watch when people buy stuff on Ebay; or airplane tickets; or shares or real estate.
Or for that matter…petrol.
Paul Wolfe says
This is absolutely spot on.
Last August I decided I was going to raise the price of the subscription to my weekly ezine – and I announced it to my list. There was an instant glut of sales just prior to the price rise.
So anyone thinking of raising their prices should definitely take your advice and tell their audience.