By Emmanuel Smart
Inflation is a real thing. Several events have happened and are still happening across the world that threaten supply chains and prices of essential goods and services. The war in Ukraine has intensified a broader food and energy crisis. It’s easy to assume that customers should understand the sudden increase in prices of goods and services because they also read the news, but assumption isn’t strategic. While a fair price increase is justified, there are a few steps to take when increasing prices.
Let Customers Know Why
Usually, customers are awakened to the news of a price increase, and they literally have to Google what’s happening before they can understand the justified price increase. This isn’t the right approach. The relationship between your business and your customers must be smooth and communication should be open. Businesses must keep customers abreast of the reasons for price increases and what’s likely to happen in the future. This makes customers trust your business more and understand your justified price increase.
The Price Increase Should Be Fair
Many entrepreneurs leverage events to increase prices unjustifiably, especially when they know customers have no choice. This is very toxic, and although customers may have no choice at the moment, their survival instincts are creating new options. If raw material costs or staffing costs increase by 20% per unit cost, it’s fair not to raise the effective per unit cost beyond that. Events that trigger price increases are not your opportunity to make more profit unless you weren’t making any before. To make more profit, you have to reduce costs or make more cost-effective products that can scale. If customers see your price increase as unfair, they will eventually become disloyal to your brand.
Reduce Prices When Necessary
Premium Motor Spirit (PMS) in a free market is the perfect example of reducing prices when market conditions change. It’s unfair to keep increasing prices when costs increase but refuse to reduce them when the event that caused the issue is resolved. For example, the egg crisis in late 2022 and early 2023 led to the rise in the cost of eggs, but as the issues got resolved, prices came down. A lot of business owners only know how to increase prices but never consider the customer and reduce prices when it’s right to do so. The problem is that a competitor will see the greed of the business owner as an opportunity and take over the market.
Always Compensate with A Gift
Even the most justified price increase is an inconvenience to customers. Imagine buying an item for $10 yesterday and then seeing it for $14 on the shelf today. Price increases don’t give customers happy emotions. This is why it’s important to compensate for every price increase and tie the compensation to the price increase. You can add any fun and useful compensation. It could be a discount card partnership with another store that sells complementary products. It could be a small gift item in the box. It could be points that can be redeemed by the customer. It could be gifts that can be won when certain achievable metrics are met. This just helps to let customers understand that you care, you will act in their best interest, and you will put them first.
It’s hard to put the customer first when you’re a market leader and there’s no known threat of competition. However, time changes really fast and the best time to be kind and considerate is when the customer knows you have the advantage, and you don’t need to be. This builds a large place for you in the customers’ hearts. Owning a place in the customers’ hearts is priceless.
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