Recognizing when to make changes in your pricing is an important part of managing prices in any business. I’ve had many people on the show who shared with us that it took them quite a long time to both realize and then accept that they would need to change prices in their business. You may struggle with that as well. And it often has quite a negative impact on business, especially growing a younger business.
This is why it’s so important for you to be able to identify and then monitor the main price drivers that affect what you charge.
If you’re periodically checking those things and/or when you’re monitoring the ups and downs of those price drivers, you’ll be able to not just see the signs that you need to make a change. Often you’ll see those signs before they become a real issue. You can get ahead of things – awesome! You’ll have more time to mitigate circumstances related to those price drivers (like find a new supplier if the current one’s price has become too high). Plus you gift yourself more time to decide what to do with your price and how to implement any changes in the most effective way.
In This Episode
In this solocast episode I share with you 5 signs that’ll help you know when to make those important changes to your pricing. Use what you learn to think reflect on the things that are impacting your prices. Make a plan so you can keep a watchful eye on those drivers and how they change. It’ll help you be more prepared and ready for what needs to comes next.
Enjoy the episode and of course if you have questions you can always reach out and ask.
Podcast Episode Highlights
- 0:00 Intro
- 2:11 Why Your Prices are Going to Change
- 4:08 Be Careful in Communicating the Price Change
- 5:45 Some Ways are More Effective than Others
- 7:33 Wrapping It Up
“The things that you base your prices upon are constantly changing over time. It stands to reason that eventually your prices are going to change too.” Janene
“..look at all the costs in your business and how those are changing. Then consider if that means a cost based- adjustment is justified.” Janene
“You have to go through that pricing thought process once again to think about whether or not there are changes that need to be made to your pricing based on the changes you’re making in your business.” Janene
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Janene: Hello and welcome to Live with The Pricing Lady. I’m Janene Liston, your hostess. Before we get started, let me remind you if you’d like to find out how you’re doing on pricing in your business, head on over to thepricinglady.com and grab a copy of my Self-assessment Pricing Scorecard. All right, let’s get stuck right in.
Today we’re gonna be talking about the five signs that’ll help you know when to make changes to your pricing. Now, one of the things as I’ve interviewed people on this show that I’ve heard many times is that people have had to come to terms with the fact that their prices are going to change over times.
And it always surprises me that people find that a shocking thing or a big realization for them, because to me it’s so obvious, but just because it’s obvious to me, doesn’t mean it’s obvious to all of you.
Why Your Prices are Going to Change
Janene: The first thing that we wanna talk about is why is it that your prices are going to change? The simple answer is that the things that you base your prices upon are constantly changing over time.
It stands to reason that eventually your prices are going to change too. If we think of the pricing thought process and the five things that we look at the customer. The offer, the value, the marketplace, and the cost and profit. You can very quickly see how over time those things are going to change.
What I encourage you to do is to at least look once a year, depending on the industry. For most of you small business owners, you’re going to look once a year at your prices. Whether you’re going to raise them or lower them or hold them. Because if you’re not looking at it every year, then you are definitely missing opportunities.
What you don’t want to do is get five or 10 or even 20 years down the road never having made a change in your prices. I can almost guarantee that you will be in a very difficult situation if that is the case with your business.
Let’s take a look at the five signs that’ll help you know when to make changes to your pricing.
The first one is fairly obvious and it’s gonna be what most of you already think about when it comes to changing prices, and that’s if your costs go up or down, right? If your costs are changing, then you’re the cost to do business, which doesn’t include just your product prices, but also if you’re a service-based business, your cost to acquire your customers or your cost. Serve your customers. Those also apply to product-based businesses.
Be Careful in Communicating the Price Change
Janene: You need to look at all the costs in your business and how those are trending, and whether or not that means that a price change is justified one way or the other.
One thing you want to be careful of, is when you communicate the price change.
If you tell them we’re changing it because costs are changing, then you are leaving the door open when your costs go in the other direction for them to expect you to make other price changes. If you say, we’re raising prices because our costs to serve you are increasing. Then if prices fall or costs fall, they’re gonna expect that your prices will fall as well.
You must be careful about that, using that as the basis for why you’re changing prices. Sign number two that’ll help you know when it’s right to make these price changes is when your profit is suffering. As we’ve said before, profit is a sign of a healthy business. When you have good profits, I’m not talking about excessive profits or profits at the expense of other people or other businesses. But I’m talking about, healthy profit in your business. If those start falling, then chances are you may need to do something with your pricing or you may need to do something with your offer or some other aspect of your business.
But certainly it would warrant for you to have a look at those prices and think about, are there some adjustments here that I need to be making? Sign number three is that you’re under overpriced. If you feel you’re under or overpriced in the market. That you’re positioning in the market, your price positioning needs to be adjusted, then certainly you’re going to want to make that adjustment.
Some Ways are More Effective than Others
Janene: Of course, there are ways to do that, some ways are more effective than others. But generally, if you’re overpriced or underpriced, then making such a change is less risky than if you are doing it simply because let’s say your costs have increased or something along those lines. That was sign number three, under or overpriced.
Now, here’s a couple of other ones. Number four is if there’s a new market segment available to you, or maybe you’re entering a new market segment. This is really interesting because often you’ve operated with your offer in a certain market segment, and you’ve gotten really good at serving those people and you’re looking for new opportunities.
You think, Well, what if I take this and put it over here. That can be really exciting. However, the price point for that segment in the market may be different than the one you’ve been working with, and so you may need to adjust your prices. It’s something you have to look at and decide what the right thing to do is.
Sign number five is if you are shifting your business. Let’s say you’re shifting to a different product line or a different format of offer. Let’s say you’ve decided to target a different geography. All of these changes or shifts in your business or your focus in your business certainly could warrant a price change.
Again, you have to go back to the basics. Who am I targeting? What are they offering or what am I offering them? What’s the value so forth. You have to go through that pricing thought process once again to think about whether or not there are changes that need to be made to your pricing based on the changes you’re making in your business.