Are you watching your COGS these days?
(I, ahem, hope you know what those letters stand for, because if not … well, then we should DEFINITELY talk. calendly.com/nyaku )
Has it gone up?
You’re probably not alone given what kind of signals the economy is sending these days.
In which case (and you’ve probably already thought about this), figuring out how to raise prices without losing customers is especially important.
You can ignore the likelihood of everybody looking to cut costs as their COGS increase (if you are B2B), or as Greater Memphis consumers feel the tightening in their wallets as prices go up.
OR (and I like this way better), you can be strategic. So, I thought I’d offer you some ideas today.
How Greater Memphis Businesses Can Raise Prices Without Losing Customers
“Things work out best for those who make the best of how things work out.” – John Wooden
It’s heartbreaking to watch Shelby County small businesses go out of business or not bring home enough bacon simply because they get trapped into thinking about their customers and their pricing in the wrong way. And as such, they end up losing customers.
When you differentiate yourself based on price alone, you simply cannot provide value. You end up competing on the wrong playing field, and it’s not one in which you’re built to win.
Yes, price competitors have been in operation since the days of the Greek agora, but it’s important to understand that if YOU want to build a sustainable, scalable — and, one day, SALE-able — business, a core foundational piece of that puzzle is that you must be charging enough for your goods and services.
Many Greater Memphis small businesses remain in perpetual survival mode because of how they price their products.
They believe their only competitive advantage lies within their pricing, so they run an ever-accelerating race to the bottom.
But even in shaky times (which, if you’re looking at current economic numbers, we are NOT currently facing), people still have money to spend.
So, it stands to reason that if you’re not bringing it in, you’re simply not doing a good enough job showing them that your place of business is the best place to spend it.
You see, it’s all about understanding the specific value you provide. And if you’re not clear on it, your prospective customers certainly won’t be.
So, how can you do better in communicating your specific value? Well, I’ve got three ideas for you today…
How to Raise Prices Without Losing Customers Tip #1: Reassess your primary selling points
Your prospects have no way to know if you are the best option for them. To regular consumers, most options are the same — in almost every industry. When you compete on price, you attract … those who are shopping based on price. And, of course, they see you as “just like everyone else.”
Then the real question is what makes your Greater Memphis business different? And how do you show that to the marketplace? That’s what you need to focus on and figure out how to quickly tell that simple story. Your prospects must turn to you because they trust you and because they see your business as worth the money — not because you’re the cheapest option.
How to Raise Prices Without Losing Customers Tip #2: Tap into customer psychology
Why can Nordstrom charge higher prices for products found elsewhere (i.e. cars, purses, ties, shoes)? It’s because of the VALUE they’ve attached to their brand (i.e. social prestige, enhanced customer service, increased self-esteem). They’ve moved themselves out of the commodity market and into the heart, emotions, and primal urges of their clients.
You need to (and can) do the same thing in your business. Yes, your customer can get a widget or receive a service for XYZ … but what AREN’T they getting when they work with that other option? Focus on identifying these aspects of your offering. Your value is not derived from the “features” of your product or service … it is found in the intangible — emotional — benefits from working with or purchasing from YOU.
How to Raise Prices Without Losing Customers Tip #3: Evaluate your offerings for bundle opportunities
For service professionals, there are only so many hours in a day and you’ll reach an income plateau very quickly when you are billing by the hour. Not to mention that you have to start every month over at zero — and there’s little stability in that. So, my advice? Begin billing on a flat fee/value basis.
If you’re scared to shift, just think of the *value* your customers will experience having a professional using flat fee billing. They won’t be nickel-and-dimed for every phone call, email, and message that comes through the office. They can communicate with you as they wish without fear and they can pick their price point of choice if you have multiple flat-fee options. Many people are willing to pay more for certainty. It’s a win-win for them — and it’s very much a win-win for the health/sustainability of your business.
For retailers or product providers, you can only play “margin games” for so long. So, identify monthly services that might augment the experience of using your products. Consider what your customers actually want (on an emotional level) and the problems they face in using your services. Restaurants could initiate a “VIP club” with special perks, automatic billing, and exclusive choices. Merchants can create enthusiast groups, or lessons and coaching.
The point is to go *beyond* the widget … and into the heart of your customers’ desires.
Remember this: There are always consumers out there with more money to spend. And they NEED your products or services. It’s up to you to convey the intrinsic value of working with you (even at a higher price point) in order to make a revenue shift with what is left of the year.
If you need help thinking this through, we’d be happy to give some insights and get you on the right track. That’s what we’re here for.
To more in your top line AND your bottom line,
Memphis Consulting Group, LLC