Is it time to raise your prices?

As we approach the Christmas trading period, you may find yourself thinking about the easiest way to increase your revenue.

Raising the price of your products or services is one simple fix solution that many SME owners are reluctant to adopt due to ongoing pressure from their cheaper competitors. So how do you justify increasing your price when you risk losing market share as a result?

Here are seven tips from Smart Company that highlight the benefits and incorrect fears associated with raising your price.

It's cheaper than chasing new customers.

You're repeat customers already make up majority of your revenue, so rather than spending the extra money to try and generate new business it makes more sense to sell your product at a premium price to your existing customers.

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Raising prices are more profitable than selling more.

Costs will increase over time but generally speaking your costs won't increase at the same rate of a price rise, meaning any additional money you make per purchase will be most likely be profit.

Price is a reflection of quality.

Your price can often unfairly indicate the quality of your product. Therefore an increase in price can often be justified by the premium product or service you offer in comparison to your competitors. 

Increased price can realign your business goals.

As mentioned, customers expect a premium service when buying a product with a premium price. Increasing the price of your product is a great opportunity to add value to your service and re-establish how your brand is viewed by the market. 

Incorrect perception of lost customers.

Although you will lose customers, it will only be the minority that purchase your product based purely on price. There are a host of other factors that people consider when making a purchase, such as customer service, product quality and purchase convenience to name a few.

Generally speaking the price increase will result into higher sales and profits.

As we discussed, your existing customers will come to you based on more than the price of your product alone. Add this to the fact that you're now receiving increased profit per product as well as potentially operating in a new premium market and it's rare that a reasonable sized increase will leave you worse off.

Profits need to be aligned with costs.

Your costs will often creep higher as a result of inflation and unless you make the adequate increases to the price of your product you will quickly find your profit margins are eroding.

Making a price increase may seem like an unnecessary risk but often you will find it's actually a good business decision to make moving forward. Not only can an increased price lead to growth and brand value, it can also ensure your cash flow remains healthy due to increased profits being generated.

For additional advice on the success and performance of your sales team Dun & Bradstreet - Sales Management

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