How to Increase Your Prices

Increasing your prices explained

The easiest way to increase your average sale is to increase your prices, yet this is an area where many business owners and managers have challenges. They fear that if they increase their prices their customers will leave in droves. In reality, they won’t.

On many occasions increasing your prices can actually increase your sales volume.

For instance, to attract new customers, a photographer in Melbourne offered free photographic sittings worth $150. One day he decided to test a price increase to see what happened. He started giving out $150 vouchers that people could use towards a photographic sitting but he increased the price of the sittings to $300 so, with the $150 voucher, customers would now pay $150 for the session.

What happened?

As a result of this initiative, his conversion rate from enquiry to sitting increased from 66% to 75-80%. There was another bonus. In the past he attracted a large number of the budget-focused (kid’s photos at shopping centres) target market. Now his clientele were more affluent and prepared to invest more in quality photography.

Interesting, isn’t it?! People’s perception of value is closely linked to price. In other words, “you get what you pay for”. If something is given away or is too cheap people often believe that there’s something wrong with it or it isn’t of great value. Conversely, if they pay a lot of money for something they feel that the product or service must be good.

In the “Dangers of Discounting” Strategy Guide we talk about the customers’ perception of price and how much of an impact it has on their buying decisions. A survey we featured in that guide shows that price ISN’T a major factor. Here are results from that survey.

In the search for some answers, one such survey has looked, perhaps more importantly, at why customers don’t buy from you or why they leave

you and move to a competitor.

Survey respondents were asked this question: ‘Why do you choose not to deal with a business or to leave a business and go to a competitor?’

The results were astounding.

It found that just 3% of people would leave a business if it was more convenient to purchase elsewhere.

9% of people said they’d leave because of the relationship they had with the person they were dealing within the business. In other words, if their favourite hairdresser left and started working for the competition, 9% of people would follow the hairdresser.

But what if all your customers leave?

As already mentioned, they just won’t. But what if some do? The table below reveals the amount by which your sales would need to reduce after implementing a price increase, before your gross profit goes down below its previous level.