How to Raise Prices without Raising Prices
As I wrote this month’s check for my daughter’s art class, I didn’t blink twice about paying twice as much as I normally do. How’d they do that? They raised the price and I barely even noticed.
The recession likely continues to hurt your small business – and your customers – but your costs are probably going up nonetheless, squeezing your profit margins more and more. At the same time, it can be more difficult than ever to pass these costs along and increase your prices due to pressure from your customers.
Difficult… but not impossible. Here are five secrets to raising prices without really raising them.
1. Fees – The oldest trick in the book. This is how governments raise more money without “raising taxes.” Increase the fee to register your car. Increase the cost of a pet license. Add a fee for having a blue front door. If the fee is reasonable, it will be paid without much fuss. That’s how my daughter’s art school got me: This month tuition is an extra $60 because of an “art supply fee.” Can’t argue with that: The kid can’t paint without a brush, right? How can you break up the costs of your business in order to charge extra while keeping base rates the same?
2. Same Price, Smaller Box – A similarly old trick, and a standby of the supermarket. A jar of mayo costs the same as it did years ago, but it holds two ounces less. In the mind of the consumer, shrinking the size of your product is considered less offensive than raising its cost. They may not even notice.
3. Raise Prices… Later – Craft a nice memo explaining that prices are staying the same… until 60 or 90 days from now, when they’re actually going up. The customer gets the good news first to soften them up for the bad.
4. Incentives – If you’re adding a fee or raising prices down the road, consider offering a bonus (such as a coupon for a free hour of work or similar) to your most loyal customers as an incentive to stay with you.
5. Tiers of Service – Service businesses may leave their standard price the same, but add a new layer of services that cost more, and offer extra benefits. Consider, for example, an in-home computer consultant: The standard service may feature limited hours and longer waits for an appointments, while customers opting to pay the new, higher rate get after-hours access and 24-hour turnarounds on appointments. You might be surprised how many customers willingly upgrade to the higher tier.