Wednesday, December 11, 2013

SG Sales Guru: How to Increase Prices Without Losing Customers

Increasing the prices of your product and services is always a difficult decision for companies. The inherent fear is that a price increase will push existing "marginal" customers to cheaper alternatives.
 
In a consult with the CEO of a Singapore-based event company, the CEO was lamenting the low ticket price his predecessor had set for an annual 3-day exhibition. The CEO confided that he needed to raise prices to remain profitable but was concerned that doing so may cause him to lose gate numbers. This is because, over the years, customers had become used to the low ticket price and they are likely to be very resistant to any price increases.
 
My strategy to him was simple. Customers simply don't take price increases well unless they perceive a difference. Hence, my suggestion to the CEO was to increase the ticket price but give his customers a goodie bag with a similar or higher value than the price increase.  Then, once the customers had begun paying the new price (probably after 2 events), the company could then stop giving the goodie bag. And because the customers had become used to the new ticket price, there would be little impact on gate numbers.
 
The beauty of this approach, is that the introduction of a goodie bag allows the company to charge a placement fee and possibly get products for free. This could then be a new revenue stream for their event.
 
So there you have it. A simple but effective strategy to raise prices without losing customers.

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