Pricing

7. Increasing Prices

7.1 Analyse the impact on profits of any proposed price change before you make it.

• Give customers advance warning if they need to budget for your price increase.
• What will the effect on sales volumes be?
• What will the effect on margins be?

7.2 Explain to your customers why you are increasing prices.

• Use the price change as an opportunity to re-emphasise the benefits you offer.
• A good explanation can strengthen your customer relationship.

7.3 You can try to hide price increases. For example:

• By gradually introducing new, higher priced products and making old products obsolete.
• By lowering the specification (and your costs), while maintaining the same price.
• By improving the specification and raising the price. It is wise to increase the price by more than the cost of the improvement.

7.4 A good relationship with customers can help to improve their perception of the value of your product and the risk of trying alternatives.

• Spending more on marketing and customer care may allow you to increase margins and turnover.