All companies struggle with pricing — how much is too much? It can be especially difficult for small and midsize businesses to balance what they charge with what the customer will bear.
However, there comes a time when it just makes sense to raise prices, and with the health of the economy improving, this could be a prime time to reassess your pricing strategy and make some upward adjustments. A Memphis small business lawyer assists small business clients with business operations, state and federal business laws, and with business taxation issues.
With that said, any kind of price increase should be considered thoughtfully and implemented carefully. In this post we provide a few ideas to help you evaluate your market, establish new pricing, and ease your existing customers into paying a bit more for what they already know and love.
Evaluate Your Market
Before raising prices, it's important to get a clear picture of what your industry and competition is charging. If you’re a hyperlocal business, evaluate other businesses in your area that serve your industry. If you have a larger reach (national or international), conduct a wider-ranging evaluation of going rates for similar products and services.
You may also find that a pricing increase is warranted based on your overall reputation, demand for your products and services, and your business volume based on referrals. When people love what you do and how you do it, incremental price increases can increase profits while still keeping your most critical business asset (your customers) happy.
Establish New Pricing
When implementing new pricing on existing products and services, you need to determine an acceptable threshold. A Boca Raton business lawyer is following this story closely. Here are some questions to help you put prices in context:
- Do my current margins allow me to earn an acceptable return on this product or service?
- How much do I need to increase pricing to make offering this product or service worth my company’s while?
- Are there additional features being added to existing products and services that will help justify the increase?
- Can I offer client testimonials to help support my pricing increase?
Ease Customers into New Pricing
There’s always the fear that raising prices could alienate your existing customer base. When you’re ready to roll out your revised pricing, here are a few strategies that can help ease the transition:
- Offer grandfathered pricing for existing customers: Acknowledge customers who have been with the company by letting them pay the old pricing for a set time period (say, six or 12 months).
- Gradual escalation: If you’re a service-based company, it may be helpful to offer a scheduled increase in costs — for example, an increase of X percent up front, with additional X percent increases at three and six months.
When it comes to pricing, you're the only one who's going to keep your company's pricing inline with both the value you offer and the standards for your industry. A Dearborn business lawyer assists clients with business law matters. Pricing isn't just about how much you charge. It's about keeping your company profitable — in every economy.