Jan

How to Raise Your Prices

What a week.

A few hundred billion more thrown at the banks, deflation, endless more losing their jobs and possibly the most historic day in American history with young Obama being inaugurated.

My younger 18 year old brother George has completed his book, has 4 magazines hunting after him to give him free space, a leading national TV journalist/presenter after him for a story and what appears to be a snowball starting to roll down a mountain. I’ve been coaching him for the last couple of years on how to start his own ventures to enable him to generate the approx £400k a year he needs to live his life fully independent (he has muscular dystrophy) to a good standard of living.

He’s 18 and has gone at it like a rocket. There is no stopping him. He couldn’t give a flying marshmallow what’s going on in the economy.

But, has ANY of that had ANY impact on you at all?

I doubt it, not really, only where you let it.

I still firmly pronounce ALL weather is local. What happen to YOU, in YOUR business, YOUR life really does have little to do with what’s going on down the road.

So, let’s go hunting those affluent customers with money to spend.

Are you doing it?

Are you actively looking for the affluent?

If not - good luck…

If so - great!

If you have any desire to break profit records in your industry FAST then take the action it says…

To today…

In the past I’ve spoken about how important it is to look to raise your prices. I won’t go into detail as to why here. But, suffice to say doing so give you more profit, better customers and can lead to power (don’t poo, poo that… LOW prices are NEVER sustainable and who wants to be in the middle ground? Have a look at what’s happened to the retailers who ran 70% off Xmas sales… I TOLD them NOT to).

Here we are.

“5 Ways to Raise Prices”

1. SNEAKILY. A litre of ice cream now has 750ml ounces.

If you go into a bedroom furniture shop, you’ll be pitched the wonderful new kind of “no-flip mattress”, which is truthfully a “can’t flip, because they’ve omitted the padded cover from one side. Any place you see switch from service to no-service, like self-serve checkouts at the supermarket, you’re actually witnessing the equivalent of a price increase by subtraction. These are sneaky ways to, in effect, raise prices by delivering less.

I’m not a fan of the strategy and, personally, I’ve always tried to deliver more than expected, contracted for or paid for. But I suppose there are many cases where you can get away with this, and there’s no good reason not to. Tread carefully, but consider.

2. UPGRADE. Create different/higher levels of service and upgrade your customers.

This is one of my favourite strategies - it works VERY well when looking for the affluent. One jeweller is brought to mind - the owner he has a small cadre of clients who pay a stiff premium fee to have him go to South Africa, to the diamond mines, and pick out exclusive diamonds for them - a good strategy. It points out that, within every customer group, there’s 5% to 20% who will step up to - and pay premiums for - higher levels of service.

I will never forget buying VIP cards for our local nightclub when I was a teen, entitling us only to stand in the shorter queue outside the back door rather than the front. Alton Tower’s do the same thing with their express ride pass.

3. ANNOUNCE THE INCREASES IN ADVANCE.

Sometimes, you’ll be blatantly raising prices on regularly and repeatedly purchased goods or services to repeat customers, with no opportunity to cleverly disguise it, or to soften the blow. When this is the case, you may want to let all or selected customers know in advance, give the best explanation you can, re-sell them, and offer them an opportunity to stock up or pay in advance at present prices.

4. IMPROVEMENTS. The usual way to mitigate a price increase is to announce it or have it occur “in context” of improvements to your facility, your products, services, hours, etc.

5. GRANDFATHERING.

This is the least courageous approach: “grandfathering” existent customers at one price, establishing the higher price for all new customers. This is often done with continuity/membership programs. Sometimes this can be used to force upgrades, by offering present clients the opportunity to upgrade and lock in that present price, or suffer the increase if they remain where they are.

There you have it, 5 simple ways to raise prices. There are some nuggets (clue) in there. Pay close attention to the ones that relate directly to attracting the AFFLUENT.

FIVE BIGGEST PRICE MISTAKES:

1. Underestimating price elasticity and failing to find ways to test higher prices.

2. Pricing based on industry norms, textbook formulas or competitors’ prices.

3. Letting your own salespeople or employees talk you out of premium prices.

4. Trying to buy quantity of customers with low prices is often a disappointment; it’s usually much better to do it with better marketing made possible by higher prices!

5. Failing to offer goods or services priced for the top 5% of your customers.

This is IMPORTANT stuff.

Raising your prices is one of the fastest ways to a big leap in profits. But, it does need some thought…

Right, gotta go, off to our beach hut to get some quiet time to finish my current book.

Have a great day.

Henry.

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