- Corporate America is now asking consumers to foot the bill in an effort to protect their bottom lines from inflation and COVID-19 pandemic costs, and their stock prices.
- You can’t keep all your customers happy, and when you raise prices, you’re bound to upset some of them. Be prepared to explain why you’re increasing prices (higher costs and/or better products and services are typically the only reasons customers want to hear), both in person and on social media if customers complain there.
- Your pricing should be based upon your customer’s perception of your product or service.
- Price based on value not cost. Perceived value or brand equity has very little to do with the cost of goods, and everything to do with what the market is willing, and yes, wants to pay.
- Stealth price increases are likely to hurt your brand.
If you haven’t noticed, prices on just about everything is climbing, and some are worried that we haven’t hit the ceiling yet. Consumers are complaining about increased prices on social media. While they understand that some price increases are imminent, tacking on a $10,000 delivery fee for a new car is way over the top.
The key question that many marketers should be asking is, “will price increases hurt our brand?” There is no one answer to that question. It depends on your brand equity, the brand’s perceived value, and the level of competition within your category.
If you have decided that you’re going to raise prices here are some guidelines:
1ne: Be transparent about it. McDonald’s, for example, is raising the salary of all employees to $15, which they said could result in higher meal costs. Starbucks raised prices a while back to help pay for a higher level of healthcare coverage.
2wo: Understand your overall pricing/product strategy. Your pricing should be based upon your customer’s perception of your product or service.
- Unique ———————— Commodity
- Essential ——————— Redundant
- Scarce ———————— Commonplace
- Addictive ——————— Replaceable
- Visible ———————— Obscure
3hree: Anticipate competitor’s moves. One supplement company raised prices 20% and key competitor responded with a direct attack saying “the same price, more value” by adding more supplements to their SKUs.
4our: Be transparent. The worst thing for good customers is finding out your prices have gone up at the checkout counter. Today at the grocery store, for example, I heard one customer say “a hundred dollars for this basket? You must think we’re made out of money!”.
Also, be prepared to answer consumer questions about pricing on social media.
5ive: If you raise prices, think strategically, not tactically. Inflation is here now but will prices recede, and if they do, will you lower your price? Have you thought about your supply chain to evaluate new vendors to help control or reduce costs? Can you save money via new packaging?
6ix: Look at private labels within your category. Private label sales continue to grow, and now there’s even premium private label. If you raise prices, a retailer might see an opportunity to promote his private label more which could take many sales away from your brand.
Finally, understand that nobody knows when/if inflation is here to stay or if consumers will continue to spend like a drunken sailor on shore leave. Already auto insiders say you have to be crazy to buy a new car today because dealers are charging full sticker or above. The media is promoting stories about people getting into a bidding war for new homes. The point is to separate the hype from reality. As Yoda said, “the future is hard to see, always in motion it is.”