The reason you should raise your prices is kind of obvious and that is with higher prices you’ll have more profit and more revenue. But there are some more subtle reasons as well. And as you read these they’ll resonate with you understand exactly why and you probably already know these intuitively.
The first one is that with higher prices there is higher perceived value.
As you know when you look at something with a really high price there’s an implicit assumption that it’s worth more it has more value and it may be a perception value maybe an aesthetic value maybe popular value or may actually be functional value. But regardless higher prices imply higher value.
The second thing is that a lot of times in terms of productions, operations, marketing all of those tasks that it requires to sell a product it’s the same amount of effort to sell a lower priced product as it is a higher priced product. And so a lot of times it’s more efficient to be selling at higher prices even if your volume goes down. You make more you make it up in revenue because you make a lot more for each particular sale.
The third reason is that it’s easier customer service a lot of times. And why is that you would think that if people are paying more money that it might require more service to them.
Well, the funny thing is that a lot of times people who spend more for a product actually have, they don’t have lower expectations for the service they get but they’re less likely to badger you and ask you a lot of questions or complain than those who are spending little money for a product and or service. And you know I can’t fully explain the psychology behind that. I just know that it’s the case that a lot of times even when you give something away for free you get a lot of complaints or questions or requirements to talk to customers. But at a higher price point I’ve discovered you get more professional people. They pester you with less petty things. They may still have very legitimate higher level questions but they’re not asking you the trivial questions because there is this mutual respect for each other. They’ve invested a lot of money your time is valuable or your service or product is quite valuable so they won’t pester you about the smaller things. And that alone is one really good reason to lower your prices or rather raise your prices.
Now I’m giving you reasons to raise your prices. As you know as marketers you have to test prices you can’t you hire isn’t always better. Lower isn’t certainly not always better. So keep that in mind as you are listening to this advice about raising your prices.
Another very good reason why you should raise your prices is that it gives you extra room for discounting and couponing and all of the marketing techniques that always drive more sales.
You know if you if you’re not actively marketing coming up with reasons to have sales and discounts and promotions and offer new coupons then you’re leaving lots and lots of money on the table and if you have higher prices it’s much easier to do that if you have a really really low price with very little margin. Then you can almost offer nothing in the way of sales or the sales that the discounts you offer would be very insignificant. So there is another really important thing to do.
The final thing I want to talk about is tiered pricing. As you know when theres several price options for a product, kind of the luxury version or the middle version or the economy version. There’s a group of people who will always buy the highest category because that’s how they perceive themselves. They want quality. They want value they want prestige all of the things that might come with the highest level of price for a product and then there are some people who always want the most cost efficient version of a product. And then there are some people who never buy the highest and never buy the lowest and always aim for the middle. So if you have at least those three options then you’re covering to some degree those categories of people who always buy in one of those categories and you can greatly expand your services and it’s really not very hard to differentiate your products. It might just be faster shipping from one level versus the other it might be a little bit more customer service it might be add on products. And so it’s easy to differentiate those different price levels if you haven’t tried that. So those are the reasons why you should raise your prices now.
Obviously if you’re in a commodity business where we’re it’s hugely competitive and everything is trading or selling at the same price level across the board then this is a little bit less relevant in that case you want to maybe add different new products and services that aren’t as commodities but for most products and services in the world. You really need to consider raising your prices.