It would seem to be a no-brainer – rising prices equals more income and profits. BUT, not always!
Typically when raising prices, a business loses about 10-15% of their existing customers, and, hopefully, since a business should ALWAYS be bringing in NEW customers, income would increase. But it doesn’t always work that way.
A lot of businesses think small increases are not noticed by the customers. Not so – consumers DO notice! There is so much competition – now especially – for the consumer dollar. People shop around ONLINE and find the best price. When a business raises prices, or changes what you get for your $, customers do notice it, and if not happy, take their business elsewhere.
Customers are watching prices more carefully. Everything is going up and consumers do not want to pay more. Deciding where to spend their money is crucial. Getting a good value for their money is also crucial.
Small businesses are having a hard time getting help, retaining customers, and struggling with higher supply cost of goods. Raising prices seems like great idea – but if not done properly, it can do more harm, and cause more loss of business. 50 cents or a dollar on even half of the items can be a big increase in income. But beware – this can run off customers.
One restaurant raised it’s prices multiple times over the past year, and a group of loyal customers that came in at least once a month kept noticing it. It was getting to the point to not be worth dining at that restaurant. Then one day, the group was at the restaurant again, actually talking about the raise in prices on the items they normally order, when the bill came. Every order was 50 cents higher on the bill than on the menu, which already had increased pricing.
The proverbial straw that broke the camel’s back – to be told “oh well we just didn’t get around to printing new menus yet. Those are our new prices.” How would you feel?
So for what the restaurant brought in with the price increase, they, in effect, lost 4 customers’ business every month – probably equaling, if not more, of a loss than the price increase brought in.
A better way would be to look for cost cutting methods, or only raise prices a little across the entire menu. And keep in mind the competition’s prices. Outpricing yourself is not a good idea.
Take notice if your sales have stayed stagnant or gone down after price increases or other major changes. That is the customers telling you something.
We all know it is a tough time for businesses now – especially small locally owned businesses – but it is important to keep your existing customers. Try daily specials, loyalty programs, staff and employee incentives to help make customers’ experience a good one, so they come back and TELL OTHERS about your business. Word of Mouth is still the BEST form of advertising. But a business has to make an effort so the customer truly has something good to say about your business.
An old saying is that if a customer has a bad experience, they tell at least 9 people, but if they had a good experience they only tell 3! Businesses need to show customers that they are important to them and work to keep them as customers.
Now is also a good time to reach out and bring in NEW customers – unfortunately, with so many businesses losing once loyal customers, another business can benefit and attract consumers to them, There a ways to reach out to new people – check out upcoming blogs for more on this and other ways to bring costumers back.