What if you go too far with your price rise? Full transcript below…
Welcome to the Business Numbers Podcast. I’m your host, Ben McAdam. I’m a profits coach, virtual CFO, and entrepreneur, and I’ve created this podcast to help you grow your business profits and understand your business numbers without judgement, and without burying you in a whole bunch of jargon that you don’t need. Just actionable tips and case studies to help you grow your business. For show notes, go to the website businessnumberspodcast.com.
If you’ve been following me for a while, you know I talk about how you can raise prices and be more profitable, even when a bunch of clients leave. I talked about that in the last episode, but what if you go too far with your price rise? I stand by what I said in the full blog article that I linked to in the show notes on the last episode. Many business owners are too cautious with price rises and that exercise is important for people to be comfortable sometimes with rising their prices. Now I want to talk about when you really do go too far with the price rise.
If you raise your prices too far, you find it harder to sign up customers. You’ll get lots of objections about price, or you’ll be put off until later, but really it’s about the price. And for the customers you do sign up, you’ll feel like you need to bend over backwards to give them value- you’ll work extra hours, throw in extra bonuses, answer their late night customer service messages, you’ll throw in discounts, bonuses, extra services or products, you’ll bend over backwards. And whenever they’re the least bit unhappy you go into an anxious panic, you’ll stop whatever other important thing you’re doing, you’ll lose sleep, et cetera, et cetera. That’s a few ways to tell if you’ve raised prices too far, you’ve raised prices too far for customers to be happy and some of it is you’ve raised prices too far for your own comfort zone. So, you have two options when you discover that you’ve raised prices too far.
Number one: keep raising your prices. I know it sounds counterintuitive, but you might need to move up a niche, or aim for bigger clients or customers and change your marketing and sales approach accordingly. You might be in a niche or working with the size of customer where you can’t have good margins, you can’t have good profits. And so as you keep raising your prices you’ll find that when people start saying, “Oh no, this isn’t for me.”, it means your marketing is attracting the wrong kind of people. And the answer isn’t to lower your prices back down, it’s that you have showed up a problem or a weakness in your sales and marketing. Like, for example, if you imagine that you’re a luxury skin care brand, there are certain things that need to appear in the marketing for people to be happy paying premium prices for the belief that this is a luxury brand- like someone in the advertising probably needs to have gold jewellery on them or something like- you know there are things that signal to people that this is a luxury premium price thing and it’s worth it. And it’s a similar thing for your product or service, or whatever you’re offering, is that if you raise your prices and you find that people aren’t happy to buy from you, it’s not necessarily because your prices are too high. It could be that you’ve just exposed something in your sales and marketing that isn’t working. So that’s option number one for when you’ve raised prices too fast is to just keep doing it and fix the real problem in your business, which is that something’s off in your marketing or sales.
Option number two is to test lower prices. Maybe you really have raised your prices too far, so contact old clients, old leads, people who almost bought from you, maybe the people on your email list who didn’t respond to your promotion, contact them and offer them a one-off deal and see what happens. Make it private. This is just a test and you don’t want everybody out there thinking your prices are going back, because you just want to test this quietly. So offer these people a one off deal and see what happens. Maybe you’ll find that it is easier to sell at a low price, just make sure it’s profitable. And I’ll talk in other episodes about the importance of margins, making sure your prices are high enough above the cost of whatever you’re selling so that you can actually have a big or growing profitable business.
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