The common mentality in order to get more sales is usually the lower prices so that way more people purchase more items. In return, you’ll be able to sell more items and therefore make more money off the products that we sell. But if you have learned anything from this website or this blog, you will know that success is usually counterintuitive. It is actually by raising prices you tend to be more ahead in many ways.
In fact, if you raise your prices sometimes you will actually make more money and generate more sales because of the power of perception. We will get into that in a moment, but first, let’s look at what can happen when you raise your prices.
3 Things Can Happen After You Raise Prices
- Sales can go down
- Sales can stay the same
- Sales can go up
If you raise your prices technically three things can happen. Sales can go down, sales can stay the same, and sales can go up. Two out of three of those are not bad!
If sales go up you are already ahead by making more money through the added amount of sales and not to mention your additional profit that you will be making for each sale.
If sales stay the same, you are still ahead because you make more money from the additional added price increase of your product or service.
If sales go down, you do make less money per product or service. However, you make a larger margin since you increased your prices and not to mention you get to save time by your dealing with fewer sales, transactions, customer complaints, etc. Now typically, I found that if you increase your prices sales do not go down too much. Even if they go down some and you are financially breaking even – you get to have more time freedom and raise the value of your company, service, and product perception.
The Power of Perception
We as humans have naturally been trained and believe that higher priced items actually are better. This does not mean they are, but we assume or think that they are. This is how we perceive things. I will give you two examples.
Example 1: The Can of Soda
The first example is when you buy a can of soda. Let’s say that you are extremely thirsty and you’re interested in a can of soda which regularly at a supermarket costs about 49 cents if you buy it by the pack. Maybe 75 cents if you buy it from a vending machine at the supermarket. However, if you are at a beach resort or clubbing in Miami’s hot nightclub the same can of soda can actually cost you $2.00 or $3.00. The thing is that can of soda will be exactly the same whether you buy from the supermarket or the Miami nightclub. The differences the perception of where your purchasing. The nightclub or the beach resort is a much higher-end and place than a supermarket. So we expect to pay more (nearly three or four times the price) and we don’t even complain about it. We accept it.
This is the power of perception when the items are similar.
Example 2: The Computer
In the second example let’s say you’re looking to purchase a computer or your home office. Let’s assume you don’t know too much about technology or computers. At the store, you are looking at two different computers that you just can’t decide which one to purchase. Computer A is $125 more than computer B – but more often than not we opt in for the computer A (the higher priced one) when we do not understand something. This is because we “assume” it is better. Since we are spending more money, we expect that the item we are purchasing is just that much better – so we don’t mind spending a little extra.
However, this does not mean that the item itself is actually better. It is just what we perceive.
How to Use the Power of Perception to Your Advantage
Since people naturally perceive higher priced items to be better, when running your business you can raise your prices on certain goods or items or just in general and some people assume that it is better. This technique is very helpful when your product requires a lot of research, knowledge, or understanding because often times many people will not fund the additional time or energy required to figure out if your product is actually better. Their time is actually worth more to purchase a higher-end item and not worry about.
Now as a tip, you don’t want to steer your customers wrong and just increased prices just to take advantage of them.
Add Value to Win Price Conscious Buyers
You will have some naturally price conscious people – this is to be expected. One way I like to overcome this is to add value to my service or products and make it a no-brainer for them the purchase. If you have current clients and you are raising prices, then just mention what you’re adding as a bonus so that way they are less reluctant to leave.
For example, if you have a product and you are selling higher-end designer shoes that cost $200 – rather than only raising the price to $250, you can also include one of the bonuses below when your customer purchases the shoes.
- Get a free pair of designer sandals to match ($75 value – Free)
- Get our designer clutch for free ($45 value – Free)
- Get our Summer Hats ($39 value – Free)
You can basically throw in a free product with your product. If you don’t want to throw in a free product can offer an additional service that’s free with the purchase which will make them seem like they are getting more value for their money. For example, any future pairs receive 15% off. So even if they buy future shoes from you – you are still above your $200 price point, but if its a one time customer your up to $50.
Don’t mess with Price Buyers
People who are just price buyers – just stink. It does happen in certain industries, and for certain people with certain products. Some people just are looking for the cheapest solution to solve their issue because it’s one of those rare issues for them that they need to take care of and do not need to come back again for years. In this case, they may be a price buyer.
However, remember that it’s better to get a loyal customer than a price sensitive customer since the loyal customer will keep coming back to you and you be able to make repeat income from them in the future.
If people are price sensitive they may try to negotiate with you or lie about the situation to get a lower price. So beware of this concept. They may say things like:
- Jimmy has that same part for $20 less
- Bobby can do that job for me 1 hour faster
However, the reason they may be saying this is that they can’t get the same part or product for cheaper, or Bobby can’t do the job faster – maybe they aren’t even on good terms with Bobby. So you have to wonder then why are they trying to negotiate with you. It’s possible your quality is better, maybe they like your service more, maybe they just trust you more. Whatever the reason is they are trying to negotiate because of some underlying issue.
People Expect Prices to Change
If you are a little hesitant to test out your pricing and raising them as your insides little bit churning – don’t be! Know and understand that people are used to prices being changed all the time. Think for example of all the different sales they run across the years. There are even times when you purchase an item in a week later you see it for a much lower price. You don’t get overly upset over it. It’s just part of the game of shopping.
You need to test your prices out to see where they fit your customer, what they like, and where their price purchasing point is. So you have to test what raising your prices will do to your business.
If it does turn out that things are really bad when you raise your prices – remember you can always lower them in the future. However, you will need to give your customers a time to adjust to the higher prices first. So it may mean that you leave the higher prices up for 1-3 months to see the result and measure it. Otherwise, you may not get an accurate read and shift too quickly jumping around back and forth.
Don’t be scared to raise your prices because you think you will lose more money or lose sales. You will never know the result fully test it and see. Two out of the three options of what will happen after you raise your prices are still in your favor. Which means the odds are still in your favor.
Resources & Helpful Tools