Knowing when and how to raise your prices makes a huge difference in your profitability. There are many signs that indicate it’s time and reasons to do so. As with anything the better prepared you are, the better choices you can make.
Many clients ask me the question “How do I know when to change my prices?” Often they are asking, because they know it’s needs to be done but aren’t sure why and how. The fear of losing even one customer is so big they can’t reconcile it in their minds.
As a result, many small businesses avoid raising prices until it’s become such a huge a problem (i.e. they’re losing sales or profits) they only other choice is to shut down. Sustainably profitable businesses are proactive when it comes to pricing and making changes. As a result they can often ride out tough times better than the rest.
In this episode…
We look at the 10 signs that tell you it’s time to adjust or raise your prices. Because when you know the signs you can catch them early. This allows you to choose the right time and way to raise your prices. Instead of doing it when you have to and/or in a rush.
Let’s take a closer look at the top 10 signs and make sure you know when it’s time to change.
Highlights of this episode:
Note: Timestamps are based on the live video recording
0:55 When People Ask Me
2:05 The Most Obvious Reason
3:07 Wrong Positioning
3:47 It’s been a long Time
4:37 No One Is Buying
5:23 Customers Say So
7:44 Working Too Hard for Too Little
8:43 New Customer Groups
9:26 New Products / Offers
10.13 Atypical reasons
Favorite quotes from this episode:
“You’ve done a value map. You’ve had a look at where you’re positioned, price versus value compared to the competition in the market. And you realize that you’re not in the right place” Janene
“Just because people aren’t buying something doesn’t necessarily mean the price is wrong. If you see that people aren’t buying something, you first need to investigate why.” Janene
“…if you start to feel that resentment, then you need to take a step back and look at either how you’re working and/ or how you’re setting your prices because one of those two things is off.“ Janene
“If you have a new customer group you’re targeting in your business, chances are, you’ll need to have different prices for the new customers. Maybe even a new offer.* Janene
“(Something like) regulatory requirements can influence what you do in your business. It can change who you target, what you offer and the prices offered.” Janene
Connect with Janene
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(Note: this transcript has been edited)
This is a question I get from clients all the time. One of the interesting things I find about when people ask me this question is they already have a sneaking suspicion they need to change their prices. But they are so afraid of losing even one customer that they simply don’t even want to try.
They’re turning to me to tell them, yeah, you have to do it. What I like to do with my clients is make sure that they understand why to do it and how to do it in a way that isn’t going to rock the boat too much. Because sometimes let’s face it we do want to rock the boat, but not all the time.
We’re going to focus on 10 signs that will help cue you in that is time to take those steps towards changing your.
The Obvious Reason
Let’s start with the really obvious thing at first. Now what I set up or help my clients set up is a process for price reviews. This is usually yearly price reviews. Not always, but most of the time it is. The first sign is that you’ve done your price review. And as a result of that, you see that there are changes to be made. Now this might seem kind of obvious, but I wanted to point it out and make sure it was the number one point here, because everything else I’m going to talk about, if your doing your yearly price review or a regular price review, this will tell you when to do it and how to go about doing it. That’s why I wanted to make sure here. So when you’re doing those price reviews, that will give you a very clear sign what to do.
Your Positioning Is Wrong
Number two, you’re positioned wrongly. You’ve done a value map. You’ve had a look at where you’re positioned price versus value compared to the competition in the market. And you realize that you’re not in the right place. Either your positioning isn’t aligned with your brand is not aligned with your target customers.
It can also be misaligned with your business and general. But you’ve done that work and you’ve seen that you are not positioned correctly and therefore that you need to make an adjustment for that.
You Haven’t Changed Prices in a Long Time
Next you haven’t changed prices in a really long time. Now, how can I know that you need to change them just because you have a done it? One thing that is important for you to understand is that if you’re not changing prices, increasing prices generally on a yearly basis, then you’re actually granting your customers a discount every year. Why do I say that?
I say that because usually inflation is increasing every year and therefore that means your costs to run your business and your costs of living have also increased. Effectively, that means that your prices have dropped by the amount of inflation.
If you haven’t raised prices or change prices in a long time, then chances are it’s time to take a look at doing that and to do it actually.
No One Is Buying From You
So next, no one is buying. Now, this is a tricky one. Just because people aren’t buying something doesn’t necessarily mean the price is wrong. So if you think that if you see that people aren’t buying something, you first need to investigate, do I have the right product or offer for the target customer group I’m trying to reach?
Do I understand the value of that? Do those customers understand the value of that? Because if they don’t understand the value, then of course, they’re not going to see the price as suitable. Once you’ve checked all those things and all those things have gotten a nice green check mark as yes they’re. Okay. Then you would think about, okay, maybe the price needs to be.
Customers Are Telling You You’re Not Charging Enough
Next customers are saying you are not charging enough. I know this one always makes me smile because you know, a customer tells you you’re not charging enough, wouldn’t you think then that you would go ahead and do it time. Time again, clients come to me and they say, “Well, you know, I should probably change my prices.”
And I asked, “Well why do you think that?” They say, “Oh, my customers are telling me I’m not charging enough.” Yet they’re still so afraid of losing just one customer that they can’t take that step forward. I want to share with you, there’s a tool that I have. If you go to thepricinglady.com/goodies, there is a tool there called the Price Change Calculator. When you access the price change calculator, you can calculate if I drop the price of my product by this much, how much more volume do I need. For most businesses increasing prices slightly because you can also do the opposite with the tool.
You can see how much volume you can lose with certain price increases. For most people, charging a bit more and losing a couple of clients may actually make you more profitable. Okay. This is important. If your customers are telling you that you’re not charging enough. Then chances are, you are not, and it’s time to change those prices. Have a look at that tool. The next time you think about changing prices, it’ll help you understand the price volume trade off.
You’re Feeling Resentful
Next you are feeling resentful. So you’re working your tail end off and you feel like, gosh, I’m doing so much work. And these people aren’t paying me much. Now, first of all, it’s not their fault, it’s yours. Yeah, I’m going to be brutally honest with you here. It’s absolutely your responsibility to make sure that you’re getting paid, what you think is a fair exchange for value. You can’t blame your customers for that. That is fully within your remit or your responsibility. But if you’re feeling that way, if you start to feel that resentment, then you need to take a step back and look at either how you’re working and/ or how you’re setting your prices because one of those two things is off.
You’re Working Really Hard But Not Profitable
Next you’re working really hard, but you’re not earning enough money. Yeah. So these two go hand in hand, but I know people who work so much harder than others and they still can’t seem to even make enough money to support themselves and their families.
This is a big problem. This is really interesting. Last week I had Joy Foster from Tech Pixies here on the show. And we’re talking about undervaluing ourselves and how important that is when you start a new business to be really careful. Because if you’re not earning enough at the beginning, then you’re not going to have the money to reinvest in the business later.
And that’s a super important thing. So again, if you’re not earning enough profit off of this and you’re working too hard than something is not aligned with your pricing and the value you’re delivering.
You Are Targeting New Customer Groups
Next, we have new customers. If you have new customers in your business, chances are, you might actually need to have different prices now by new customers I don’t mean people in the same target group, but let’s say you decided to target small businesses first and then expand that. Businesses 50 people or less let’s say, and then now you’re starting to. Get some momentum there and you’ve decided to expand that. And you’ve started to get customers whose businesses have say a thousand or more people.
Well, that might actually be a different target group for you. Not only might your prices need to change, but your offers might need to change as well.
You’re Offer Changes
Next, your offer changes. If your offer is changing, then of course your prices are going to be adjusting and this can be different things. Let’s say you’re in retail.
Maybe you have new inventory coming in. You have new offers. Maybe they’re just updates of what you were offering before, or maybe they’re. You know, better versions of that or something completely different, but that may mean that you need to adjust prices on the old ones in order to bring in the new inventory and get rid of the old inventory.
Again, new products or new offers can also indicate that it’s time to change your prices.