The art of pricing
Price increases are necessary in today's world.
Clients understand that prices need to go up as they have the same problem in everyday life with their inputs being raised.
A business that misses a price rise each year runs the risk of declining margins and not having the necessary cash to fund its operation.
Sometimes, people don’t put their prices up for fear that they may lose clients. However, based on our experience so long as your increases are reasonable you will never lose clients.
The rule of thumb is that prices should go up by the consumer price index (CPI) each year, or perhaps, slightly more where the business is faced with extra import costs if it’s heavily reliant on electricity, for example 4% is often a suggested figure.
It’s generally accepted that clients will accept price increases as high as 10% if they are happy with the goods and services, but this does not hold out in tough times when people are more price conscious.
I have been told to never put your prices up by more than 20%, even if you can justify on the basis that you produced a lot more goods and services. This is a barrier that the client will resist no matter what.
Every so often you should check your prices relative to the market rate. There needs to be a price leader, but most people are price followers.
A price leader is someone that has an outstanding location, or they have a good service offering that is still fairly new in this case you are entitled to lead.
Pricing is a science and an art that is hard to get it right all the time.
We always operate with a fixed fee price list and I find that way if you get challenged you have something to refer to.
Another rule in pricing is to price fairly, in other words charge everyone the same price for a similar good or service.
Do not make the mistake of thinking someone can afford to pay more or on the other side thinking someone is so poor they deserve much lower price.
The main thing is to not be afraid to raise your prices every year.