Raising Prices

14th July 2016

When did you last raise your prices? Most of the businesses I start coaching haven’t done so for some time, generally because they are scared of losing the loyal customers they already have, or because they feel it will prevent them from bringing new customers on board.

I recently met with one business where they are agents for various different companies, so buy their products at normal commercial rates, and are advised of the RRP, “Recommended Retail Price”. However, instead of putting those prices on their showroom stock they then reduce the price by a certain percentage, allowing them still a reasonable, but considerably reduced margin, and, so they say, ensuring that they are competitive. The trouble is that many people still ask for a discount off the new prices, at which point they have to explain that the shown price is already significantly reduced, and there is no more reduction to be made. I pointed out that actually a good number of people who come into their store do not know the standard price of their product, and therefore they would be better off leaving the RRP as originally suggested, and then should they be asked for a discount, they can oblige, and probably still sell it for more than they would have with their original strategy. In addition they would almost certainly have a more satisfied customer because they would feel they had achieved something by getting the vendor to drop their price.

The point is, it is so easy to give money away, when in many cases you simply don’t need to. But if you are still struggling to raise your prices, Brexit has given you an ideal excuse to do so. Inflation in the next few months is almost inevitable, so why not take this opportunity to raise your prices, and see what it does to your bottom line.

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