Especially right now, a common business misconception is that raising prices will drive away customers…
Compared to other levers you can pull, a small, strategic price increase can work wonders for your bottom line and in parallel, increase the valuation of your business.
Before going any further, what should you be thinking about?
🔸 Assess Your Current Pricing Strategy
Does your pricing accurately reflect your brand value and the true cost of providing your products or services? Consider the following:
> Cost structure. Direct and indirect production costs, labour and overheads.
> Market positioning. Your brand position relative to competitors and perceived value.
> Competitive landscape. Competitor pricing and market trends.
🔸 Increase Prices Incrementally to Test the Waters
Once you understand your pricing strategy, start with a modest price hike of 3-5% on selected products or services. This increment is usually small enough to avoid scaring off customers, while still making a significant impact on your bottom line. IMPORTANT: measure what happens and track your sales data.
🔸 Communicate Value to Your Customers
Make sure your customers understand the unique benefits your product or service offers. Emphasise quality, customer service or any improvements that justify the price increase. Be transparent – if customers know the reasons behind the change, they’re more likely to accept it.
🔸 Monitor Your Competition
Be aware of your competitors’ pricing strategies and react accordingly. Position your business as a leader in your industry to justify a premium. Do not blindly copy your competitors.
🔸 Leverage Cost Savings to Add Value
Review your costs and identify areas for savings. Can you negotiate better deals with suppliers, streamline processes or reduce overheads? Pass on those savings to customers in the form of added value or bundle deals, reinforcing the perception of value.
🔸 Measure and Adjust
You must continuously monitor your new pricing strategy’s performance, customer feedback, and overall market conditions. Be prepared to adjust as necessary, whether that means fine-tuning your prices, improving your offerings, or revisiting your cost structure.
If you implement a well-thought-out price increase, you can boost your profitability and ultimately, your business valuation.