This is a dilemma faced by most businesses right now. The cost of doing business is increasing — in a big way, in some cases such as the transportation and restaurant industries. Even if your business isn’t a heavy user of fuel or food, there is no question that your costs are increasing. At what point do your raise your own prices, and how do you do it?
One thing to remember is that you are probably not alone and that your competitors are facing the same pressures. But if you’re the first to make the move, will your customers switch? Maybe. Or they may simply look for another alternative. Worse yet, they may do without. There are ways to handle your price increase and still keep your customers
Reuben Swartz discussed this very problem in a recent post. He references John Quelch at the Harvard Business Review on the subject. I really like one of Quelch’s suggestions, and I hope you are in a position to do this: “…unbundling is a great way to pass on a price increase to those who value your full offering while reducing price (and your costs) for those who only want part of your offering. For example, you might increase prices by 10%, but offer a 15% discount for customers who can schedule delivery 2 weeks in advance.” Your average sale may go down slightly, but it probably won’t affect your margin, and it’s certainly better than losing customers.
Quelch’s key point, though, is to understand what represents value to your customers. Knowing that, for instance, lets you put together a promotion that will appeal to customers. Once you’ve thought through your value proposition, get creative!