The
Right Way to Raise Prices
All
this talk about inflation offers ample cover to charge more for your products.
But give careful consideration to your customers and employees before you start
repricing. Then, make your case using these three messages.
Every day we're hearing more noise and concern
in the media about rising inflation and the prospect of further dramatic
cost-of-living increases across the economy. Whether these changes turn out to
be temporary blips (based on pent-up demand, inventory and material shortfalls,
and other scarcity factors) or longer term and more permanent structural
adjustments is almost irrelevant, interestingly enough. In some ways, much like
the last few years as the shares and market caps of tech stocks exploded and
folks on the sideline were left in the dust, fear of missing out (FOMO) is once
again top of mind for many business builders and owners.
No one really wants to miss the opportunity to
get while the gettin's good by not jumping on the price hike bandwagon and
goosing their prices -- if they can get away with it. I'm not
talking about the crooks and price-gouging a-holes who ripped off people by
charging excessive prices for masks and other PPE. I'm also not talking about
the greed heads who added COVID-19 add-ons and charged extra for the packaging
for carryout food you couldn't eat in their places even if you wanted to during
the pandemic.
I'm talking about the tantalizing desire, and
even the peer and investor pressure, to raise your prices as things start to
return to the new normal. More to the point, what should you
be thinking about as you make your own pricing decisions. I'm also trying to
separate what you might think of as the morality of price hikes right now when
millions of people are still unemployed and struggling financially from the
more practical business and economic considerations relating to your own
company's needs and financial stability.
It's easy, when the press would have you
believe that everyone else is doing it, to feel like the smartest and simplest
decision is to simply go along with the crowd. When Chipotle raises prices 4%
and blames it on higher employee wage costs,
which they claim they are simply passing on to their customers, it's not that
hard to convince yourself that you should be taking some similar action.
But, for all kinds of reasons, what's
"good" for others (and maybe even smart for some of them given the
likely short duration of their particular offerings - such as COVID-19 testing
or vaccine administration) doesn't necessarily make sense for you. The last
thing you want to do right now is sacrifice years-long customer loyalty and
relationships for some modest short-term gains in margin. Customers who think
you're taking advantage of them, or the current situation, aren't coming back.
People never forget how you make them feel. If anything, now might be the very
best time to give your regulars a break on prices to welcome them back.
Don't think for a minute that your customers
aren't paying attention to the portions and perks that used to be part of the
standard package in the "old" days. Trying to save money and avoid
raising your prices thru aggressive portion control and other cutbacks is a
great way to lose that precious little thing called trust. Anyone
who is stupid enough to think that customers don't catch on to
"shrinkflation" deserves to lose their customers' confidence and
eventually their business. And, by the way, don't forget that your own
employees are also "consumers", and they may not be that pleased to
be "shorting" the folks they've served and befriended for years.
Bottom line: if you're going to raise your
prices, you're also going to need to have a solid basis, an easy way to
demonstrate your rationale, and an effective way to get the message out to all
of the stakeholders - customers, employees, regulators, and the media. People
don't want to be marketed to; they want to be communicated with. If you do it
right, carefully and thoughtfully, you can make everyone part of the effort
and partners in the solution. Otherwise,
things can blow up in your face pretty quickly.
So, as you make your case inside and outside
your business, focus on three main messages:
(1) Our business has always been about value,
not price. Price is what you pay, but solid value is what you get. To continue
to give you the quality, service and value you deserve, we have to continue to
make the necessary (and more costly) investments in raw materials, supplies,
resources, and other component parts of our products and services that you have
come to expect.
(2) Every business is a people business, and
our people are the most essential element in our operations and our success. If
we don't treat and compensate them fairly and fully - not because it's a
requirement, but because it's the right thing to do - we won't be able to
attract, train and retain the high-quality dedicated and committed team that we
have built, or be able to deliver the products and services to you that you
desire and need.
(3) The proof is always in the pudding. Ask our people if they're pleased to be back, eager to get to work, and have been treated and paid equitably throughout this long and painful journey. There's no better way to see if we're living up to our side of the bargain and taking care of business than to ask the team members who make our business possible every day just how we're doing. We're glad they're back; we're glad you're back, and we're all seeing a little light at the end of this very dark and lengthy tunnel. Tough times don't last; tough people do.
JUN 15, 2021
