The decision on whether to raise prices is always a difficult one that needs to take into consideration many factors. However, with rising costs or changing market conditions, it inevitably becomes necessary for every ecommerce company to raise prices.
Raising prices always comes down to a balance between maximizing revenue but also ensuring that your prices are still in line with your customer’s expectation so that they keep buying.
Here are some tips on how to raise your prices effectively, without losing loyal or potential customers.
Research is the essential first step when it comes to raising your price. Successful ecommerce companies re-examine their strategies frequently, ranging from daily to every year, to determine if it’s time for an increase and, if so, by how much. There are many techniques you can use to gauge your market to see if a price increase is going to enhance or hurt your revenue.
You can also test new pricing structures with a small segment of your market to see what the effect on revenue would probably be. It’s vital to not raise your prices just because your competitors raised theirs.
When applied to prices, Weber’s law states that changes that are small relative to the initial price might not be noticed at all. For example, if Product A is $25.99, most will probably not notice an increase of $1. The magic number seems to be about 10%, above which price increases may start to face increased notice and resistance from customers.
It’s always important for your customers to understand the value you provide for the price you charge. Customers value transparency and authenticity from the brands they buy from and, therefore, it’s important to link your price increases directly to the reason behind your rise.
Clearly communicate the reasons for the increase on your website, write a blog post and consider using social media channels to get the word out. Explain the reason for the increase whether it’s to keep up with rising costs so you can maintain a high quality product, you’ve added new features or you have improved your service - about 81% of shoppers say they would be willing to pay more for better customer service.
Even with all of this communication, it’s still best to have a formal response prepared for those who inquire directly.
Adding in a lower cost, complementary product or products can increase the value customers feel they are getting. This can make them more agreeable to price increases and can lower the number of customers that choose not to buy your product at the higher price. This is also an opportunity to differentiate yourself from your competitors by conveniently bundling in products that customers wanted anyway and at a lower price than if they were sold separately.
Customers are much more accepting of a price change when they feel like they’ve received ample heads-up, understand the reasons for the increase and are compensated for being a loyal customer. Another way to ease the change to a higher price is to offer a deal to existing customers. For example, offer grandfather discounting, which provides a discount for a certain period of time. Be completely clear about both the amount of the discount and when it expires (for example, in 3, 6, or 12 months). Taking care of existing customers will help them accept your price increase and even perhaps increase their loyalty to you.
While it can be challenging, every business eventually needs to raise prices. As customer preferences evolve, input costs change and market conditions adjust, your pricing needs to account for it. If your price matches the value you’re providing most of your customers, they’re likely to accept a reasonable increase. Whatever you do, don’t apologize. Just be up-front and remember that the right price for your product doesn’t necessarily mean having the lowest price.
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