Repricing Your Product Or Service

Posted on Posted in Business Basics

price-increasesBlindly we keep working away at our business whilst price increases are going unnoticed.

Before our every eyes electricity prices are going up, memberships are increasing, communications are increasing in price, along with software and hardware for our computers. Never mind that people who carry stock have repeated increases in stock.

Have your home business overheads gone up? 

In a previous article I talked about not sitting back in your business enjoying the fact that it is going well and not bothering to keep your finger on the pulse.  A business owner who does sit back and not do too much to their business will soon become bored and lose motivation to improve their business, and if it is not them that gets bored their customers will do and will look elsewhere.

Part of keeping your finger on the pulse is watching your pricing so that you continue to make a profit but be price competitive at the same time. Very few months will go by without your expenses changing, or should I say going up in price. After all very little goes down, does it?

Whether it is computer expenses, telephone, electricity, stationery, postage, material costs, accountancy fees or whatever, you will find that your business costs can go up as much as 10% in any one year.

How To Handle Increased Overheads

Check your pricing. If the supply price changes, then so too should your sale price be re-evaluated. It may not need changing, but don’t be blasé about it. Why, well we don’t necessarily change prices at each price increase.

Deciding When  to Increase Costs

It does not matter whether you have a product to sell or a service, look at your prices.

Example only: If something costs $5 in materials and with other costs of $5, it has a total manufacturing cost of $10 and it sells at $15 wholesale, then if the materials costs go up 10% to $5.50 you may want to lift your price to at least $15.50.

Then again, rather than continual price increases as in the above example, you may raise the price to $16 (if competition will allow) and then absorb other increases for a while rather than having another price increase sooner rather than later.

When you realize that you have had overhead price increases you need to look at:

  • the demand for your products at the time (it could be a seasonal product and this could be a time to cash in or alternatively it could be when you have to be more competitive)
  • competitive pricing – make sure that you do not price yourself out of the market
  • not increasing your prices too frequently as it could scare customers off
  • could you reduce something in your current overheads so that you do not need to increase prices right now

Communicate Your Price Changes

It is a good idea to communicate your price changes to your customers.  You may decide to give them some notice by email so that they are not surprised when it happens but at least explain why it is happening so that they do not think you are just being greedy.

I have a client that I have been blog writing for over the past 5 years and I decided several years ago that I would have one price increase a year of 3%. But one year I had to increase it 10% because I had to pay for industry specific training. My initial cost had been very competitive to start with so a solid increase was not out of the way anyway.

Take any price increases seriously but do make sure that you are making a profit because there is no fun being in business if you are not making money along the way.

In saying that you may feel that you need to absorb some higher costs for a period of time if general trading is slow.

If you do put your price up and think it is a mistake trade it at a discount until you feel it can accommodate the new price structure.

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