This blog post is reposted from the Marketing Blog. It is important for us to think about our customers and the pricing situation as everyone is struggling right now. Enjoy! - Kyle
If you have ever worked for a company for more than one year, then you have no doubt experienced price increases. This is one of the fastest ways for companies to earn a few extra dollars and quite frankly one of the easiest.
As marketers, when we have to market and sell the same items at a new, higher price, we may find that the tradition campaigns become less effective. This is especially true when we hear objections from our customers. If there have been little or no changes to a given product, then it is next to impossible to overcome objections related to price.
One of the biggest concerns that marketers have about price increases is that of customer attrition. This is especially true in markets where your competitor is priced are lower or about the same as your offering. There is always someone else that your customer can buy from. A recent study I read indicated that even though price can be an obstacle to buying, current customers are less likely to leave you after a price increase.
There are a number of factors that explain why this is the case. Also, one must consider the cost to the customer to start from scratch. This has both and emotional as well as financial component.
Customers have been conditioned to find the sale or ask for a discount. When introducing a price increase, customers do not want to incur the full impact. This is why they will continue to ask for discounts even after a price increase has been stated. As noted above however, even with a price increase, customers are not necessarily going to leave you.
Here are some ways to overcome objections related to price increases:
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 final bit of advice I can give around price increases is that you should really understand your competition and what types of alternatives are available to your customer.
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.
Source: http://georgiasbdc.typepad.com/georgia_sbdc/2009/02/increase-your-price-marketing-in-tough-times.html
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