May 09, 2018 The 5 Myths and Mistakes of Pricing – Mistake #1 – Not Raising Prices Regularly
One of the biggest mistakes small companies make is not raising prices every year or two. First of all, your costs are typically going up and you need to raise prices to get that money back. Otherwise your margins will fall and unless your sales are expanding rapidly, you profits will also fall. Make no mistake, big companies raise prices continuously. They are not going to wait around.
Secondly, your customers expect prices to go up. The cost of most everything they buy goes up, so they are prepared for a modest increase from you.
Thirdly, if you have differentiated your product or service in the eyes of your customers, they are already paying you a premium for that. You need to maintain that premium price or they might think you are cutting the quality of what you sell them.
Lastly, once you forego a price increase, there is no making up for it later. If you leave most prices alone for several years, then need to raise them to make up for lost ground, your customers will really notice. Think of the lobster. Put one in cold water and slowly heat the pot and they will stay in and get cooked. Try to put them in boiling water, and they try to jump out. It is just like that with customers.
You don’t have to be a pricing consultant to understand that you do not want your customers to jump out.
Apollo Consulting Group, Newport, RI