How Can you Raise Prices in this Economy?

One of the more frustrating aspects of my practice is helping clients understand the importance of price in business success. In tough times, the knee-jerk reaction to regaining customers and market share is often to lower prices. Please don't do that!

First, the last thing any business needs to do during a slow down is to reduce profits when sales are going down. Second, study after study indicates the customer - the very person you are trying to impress with your self-sacrificing "low price" - couldn't care less.

What?? But everyone says they are watching their pennies during this recession - how could customers not care about price? The answer is that sellers and buyers are seldom talking about the same thing when they say the word "price.

"When a Seller Says "Price" they are referring to the shelf price - what customers pay.

When a Customer Says "Price" the customer is talking about the money they spend, the risk they bear and the time it takes (among other things) to complete a purchase. Understanding what a customer means when they say "I want low prices" can mean the difference between success and bankruptcy.

A recent Wall Street Journal article reported on a fascinating consumer test that illustrates this point well:

Why Tie Marketing to Time, Not Money By Kelly Spors, March 24, 2009, 9:07 AM ET"In today’s recession, many small businesses may think it’s wise to tie their marketing to money and value to appeal to cash-strapped consumers. But perhaps they should tie it to something else of considerable value: time."

"A new study by researchers at Stanford Business School, published in the Journal of Consumer Research, found that it’s generally far more lucrative for businesses to reference time and personal experiences in their marketing than focusing on monetary value.""The experiment showed that the sign that stressed time brought in twice as many passersby who ultimately paid twice as much than when the signing stressing money was posted. Those customers who bought with the sign mentioning time also reported liking the lemonade more than the others."***

If any of my readers would like to discuss this is more detail for their business, please call or email and we'll set up an appointment.