« Marketing momentum | Main | Brochure tips »
Raise your prices
Raising prices can be one of the most powerful marketing tools for a small business. But I'd be surprised if you saw it that way. Instead, the very idea might make you squirm in your seat or conjur up images of unhappy customers defecting to your competitors by the truckload.
But if you really sat down and analyzed it, you'd see that a price increase is a very profitable marketing tool. In fact, the consulting firm McKinsey once studied over 2,400 companies and found that a 1% price increase boosted, on average, these companies' bottom lines by 11%. A 1% increase in volume only generated a 3.3% increase in the bottom line.
Maybe sales (along with marketing) should spend as much time on pricing as they do on new business development.
I'll talk in future posts about how important it is to establish value in your service offering...as a precursory to any price increase. But for now, I'll leave you with this thought: Every minute you wring your hands over increasing your prices, your buyers are trying to figure out how to raise theirs!
February 7, 2005 | Permalink
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c4eee53ef00d834387dd753ef
Listed below are links to weblogs that reference Raise your prices:
Comments
Hi Jay!
Good advice, but I can't believe that raising prices 1% would do much good. If I'm charging $150 an hour now, will it really do me any good to charge $151.50?
Fifteen years ago, I was charging $50 an hour. My business was bumping along, but no one seemed wildly enthusiastic. I decided to raise my price to $90 an hour. People immediately got enthusiastic, and my business tripled.
Thirty or more years ago, my father used to make a little money on the side by preparing tax returns for his clients. He charged $50 per return. One year, after lots of persuasion from my mother, he raised the price to $500. Not a single client even batted an eyelash.
One point about pricing is that, with an intangible product, clients can't kick the metaphoical tirres, so they often take price as a measure of value. On the other hand, you have to provide the quality. If you're lousy at what you do, don't raise your prices.
Posted by: Rick Holton | Mar 9, 2005 8:52:48 AM
