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.
Price increases can negatively impact the sales and marketing efforts for today’s busy marketing professional. A price increase on products or services that haven’t changed creates a difficult scenario for current customers familiar with a lower cost. This is especially true when we hear objections from our customers expressing their dissatisfaction. With few or literally no changes to a given product overcoming objections is difficult.
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 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.
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:
Articulate value that is greater than or equal to that of your actual price increase. No one wants to pay more money for the same old thing. It is very difficult to justify given the current state of the economy and the growth of a competitive landscape.
Evaluate the cost for your customer to switch. This consideration has always been popular among phone companies. They not only want to sell more to existing customers, but they also want to attract new ones. You must be able to explain to your customer what costs he will incur if he changes providers. These costs may be both financial as well as emotional. How much time, energy, and resources will it take to truly switch?
Segment your price increase. Not all customer are equal so treat them differently to make the transition smooth and get the biggest bang for your buck.The truth of the matter is that your customers are different. Some have been doing business with you for a long time. Others are working with you for the first time. Your price increase should be reflective of the individuality of your customers.
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.
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