Each year, thousands of companies consistently raise prices to increase margins and offset growth in various costs. For anyone working in corporate America, you are quite familiar with this tactic. For marketers, rising costs are always a challenge.
As marketing professionals trying to sell around price increase, we more often find that traditional campaigns become less effective. All it takes is one heavily weighted variable to have a negative impact on campaign performance. This is especially true when we hear objections from our customers and are unable to fully justify the increase. With few changes to a given product the prospect of creating value is limited.
The biggest issue that many marketers have about the dreaded price increase is losing customers to lower priced competitors. This is especially true in segments where competitors products are priced less than your offering. There is always someone else that your customer can buy from and sometimes that is a very real option. You will be glad to know however that a recent study found that few customers migrate to a competitor based on prices alone.
There are a number of reasons why customers do not jump ship so quickly. The bottom line is that switch has costs associated with it. These costs are both and emotional as well as financial.
Your customers, and all consumers for that matter, have been conditioned to find the lowest price possible for any given product or service. When rolling out a price increase, customers do not want to pay full price. This is why they continue to ask for discounts even after a price increase has been put into affect.
Below I list just a few things to consider before communicating a price increase to customers. Do what you can to lighten the load or simply divert attention to something of greater value.
Add value that is greater than or equal to your price increase. Customers do not want to pay more for the same old thing. When they do, their perception of value diminishes. Provide additional services, support, or terms to deliver additional value that is substantiated by price.
Focus on switching costs. If a customer has to leave you, there are direct and indirect costs associated with doing so. Make a list for yourself. By moving to a new vendor, does you customer have to pay a new fee of some sort? Will they lose money by canceling with you or your services? How much time and effort do they need to put into finding a new vendor?
Do not treat all customers equally. I know it is taboo today to say such a thing but not all customers are equal. Some have been with you a long time. Others are working with you for the first time. Your price increases should reflect the individuality of your customers and the impact you wish to have. Consider treating customers differently.
The last piece of advice I can give anyone thinking about delivering price increases is to fully understand the competition and what types of alternatives are available to those you currently serve.
If you have a stronger package at a better price than you competitors, switching is not an issue. If your offering is less valuable and more expensive, then perhaps you need to reevaluate your pricing. As a marketer, your job is to create a perception of value or remedy for a given need. Identify that need and focus your messaging on meeting that need. When you do, price is rarely an issue.
As marketing professionals trying to sell around price increase, we more often find that traditional campaigns become less effective. All it takes is one heavily weighted variable to have a negative impact on campaign performance. This is especially true when we hear objections from our customers and are unable to fully justify the increase. With few changes to a given product the prospect of creating value is limited.
The biggest issue that many marketers have about the dreaded price increase is losing customers to lower priced competitors. This is especially true in segments where competitors products are priced less than your offering. There is always someone else that your customer can buy from and sometimes that is a very real option. You will be glad to know however that a recent study found that few customers migrate to a competitor based on prices alone.
There are a number of reasons why customers do not jump ship so quickly. The bottom line is that switch has costs associated with it. These costs are both and emotional as well as financial.
Your customers, and all consumers for that matter, have been conditioned to find the lowest price possible for any given product or service. When rolling out a price increase, customers do not want to pay full price. This is why they continue to ask for discounts even after a price increase has been put into affect.
Below I list just a few things to consider before communicating a price increase to customers. Do what you can to lighten the load or simply divert attention to something of greater value.
Add value that is greater than or equal to your price increase. Customers do not want to pay more for the same old thing. When they do, their perception of value diminishes. Provide additional services, support, or terms to deliver additional value that is substantiated by price.
Focus on switching costs. If a customer has to leave you, there are direct and indirect costs associated with doing so. Make a list for yourself. By moving to a new vendor, does you customer have to pay a new fee of some sort? Will they lose money by canceling with you or your services? How much time and effort do they need to put into finding a new vendor?
Do not treat all customers equally. I know it is taboo today to say such a thing but not all customers are equal. Some have been with you a long time. Others are working with you for the first time. Your price increases should reflect the individuality of your customers and the impact you wish to have. Consider treating customers differently.
The last piece of advice I can give anyone thinking about delivering price increases is to fully understand the competition and what types of alternatives are available to those you currently serve.
If you have a stronger package at a better price than you competitors, switching is not an issue. If your offering is less valuable and more expensive, then perhaps you need to reevaluate your pricing. As a marketer, your job is to create a perception of value or remedy for a given need. Identify that need and focus your messaging on meeting that need. When you do, price is rarely an issue.
About the Author:
Michael Fleischner is an Internet Marketing Expert with more than 14 years of marketing experience. He is an author and founder of The Marketing Blog. Read his search engine optimization book, SEO Made Simple, to enhance your internet business.
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