You’ll Lose More Customers If You Don’t Raise Prices
Ask business owners what one of their greatest fears is, and you’ll likely hear the same response: Raising prices will cost them customers. The truth, however, is that not raising your prices regularly will cost you many more customers than doing stark, periodic raises.
What kind of backwards math is that? Here’s how it works.
Let’s look at an odd pairing of columns:
This shows the pricing for internet and monthly house cleaning service each month. You’ll see that the internet cost has increased slowly over the past decade, by about $2 to $3 per month. Meanwhile, the house cleaner has kept the same rate for nine years. In year 10, though, they raised it to $62 per month.
Most people will look at this chart and think the internet price increases are reasonable, but the house cleaner is insane. Raising their rate 55% in one year? Who do they think they are? If you’re like most of us, being notified of that kind of price increase will send you straight to Yelp to find an alternative.
Technically, however, the rates went up the same amount over 10 years. So why the disconnect? You probably already know the answer: Humans don’t notice small changes, but we sure as heck notice big ones. It’s the same reason that it’s easy for us to get out of the way when someone throws a baseball at our faces, but hard for us to really care about climate change.
Slow, long-term changes simply don’t register the same way sudden, large ones do.
Don’t hope for the best
The point of all this is this: Business owners fear raising prices so much that they frequently end up stuck in the house cleaner column on the right. And by the time they’re forced to make a decision, the increase required to keep the doors open is huge — and very noticeable.
Some business owners might try to rationalize this by imagining their customers saying, “Well, I got a good deal for a long time, so it’s OK that the rates are going up so much.” But that’s not how people are likely to perceive this situation. In reality, few care about the good deal they have been getting; they’re only focused on what it will cost them in the future. And they’ll be off after another good deal … somewhere else.
How to raise prices the right way
Wondering how to go about raising prices in a way that won’t make your customers balk? This article lays it out, step by step.