It’s Time To Raise Your Prices – Though Everyone Will Tell You Not To
They’ve stopped putting gas in their cars, supersizing their “value meals” and foregoing makeup?
Of course not.
Are they asking for “What’s on sale” or for the “deal?”
Does that mean you can’t raise your prices?
Look, most businesses held the line on price increases over the past few years hoping they could hold onto customers. That went for dealers, distributors, manufacturers and retailers.
But those same people are now realizing the economy has gotten better, so they are looking to recoup the losses they had previously absorbed. That’s why inflation is coming – from everywhere.
Yet there is this, in my opinion, misguided presumption that price transparency is what it is all about. That customers “know what you paid for an item” and know that low prices are the only way you can compete. The customer is now the “pricing expert.”
Price doesn’t make something a great value, people do.
Underpricing to try and persuade people to shop with you doesn’t work as a business model. Sure you can buy market share but someone somewhere is footing the bill – the owner or the stockholders.
When I rhetorically asked my audience recently how much their mark-up was, a woman shouted back, “You mean what it should be or what I have to make it in order for it to move?”
Let’s face it, ask customers what they want to pay and they’ll say nothing. They want the choice steak, cooked to perfection, cut, put on the fork and pre-chewed so all they have to do is swallow – and all just for the privilege of feeding them.
OK that might have gone too far, but you get my point…
Many people feel items are “grossly marked up.” Yet the markup between what the retailer pays the manufacturer or distributor covers all the costs of having a brick and mortar store where customers can shop and leaves the shop owner only 3-4 cents profit on the dollar.
Labor costs have gone up because as the economy has gotten better, the best employees are looking for more money. Material costs have increased along with a host of other fees and costs.
If you as a retailer don’t increase your prices enough to be profitable, you’ll be gone.
Don’t care if you try to get a cash mob to love you, your sign is plastered with “buy local” or the rest. If you can’t be profitable, you won’t be around.
You don’t get stars in your crown for incurring more debt because customers pressured you to lower prices. You have to lower your debt and you can only do that if you are making more profit, not less.
If you are doing everything in your power to provide an exceptional experience to everyone you meet, if your customers willingly drive past your competitors to shop with you, if you do extra things for no charge but you still aren’t making money…what are you waiting for?
Don’t take your knowledge and passion out of your pricing or you’ll be reduced to an out of business sign.
Tomorrow: Raise your prices. Here’s how…