Not too long ago, I wrote an article explaining that having the right price doesn’t necessarily mean having the lowest price. I stand by it, and now I want to take it a step further. Sometimes, the right price doesn’t have to be low at all.
That’s right. Instead of sacrificing your margins, you should consider expanding them even further. Retailers don’t need an Amazon-level profit margin to succeed. As a matter of fact, I would encourage all retailers to avoid margins that thin.
Of course for every action there is a counteraction. It can be worrisome to raise your prices because you don’t want to turn your customers away from your brand.
Luckily, there are ways to get the best of both worlds. The following advice will help you justify price increases to keep your customers from abandoning carts.
When you increase the prices of products, you need to make up for it in some way. How would you feel if your favourite store increased the prices of your favourite products and didn’t add value in some way?
Of course, you don’t need to make any drastic changes. But, you need to make sure some bases are covered. One of the best ways to justify a premium is through your customer service.
About 81% of shoppers would pay more for better customer services, so you know it’s a big deal. Introduce live chat to aid them with any purchase question they might have. It’s helpful for 90% of customers, and can actually cut back on business expenses.
Inexpensive or even free shipping is another way to increase your prices. By implementing free shipping, you make the customer feel like they are only paying for the product instead of the services that come with it. And a price increase should cushion the shipping costs you’d have to face.
You know what’s awesome? Getting more stuff at a better price.
When you bundle similar or complementary products together, you give the customer a better deal than before: two products that are only slightly higher than the price of one of them.
Thanks to the ambiguity, customers are not aware of the actual costs of the products, so you can use that to your advantage. By increasing the prices of both slightly to make a new price, you can give the customer a deal.
A study done by Carnegie Mellon University shows that consumers preferred product bundling when coupled with an option to buy each piece individually. So if you’re bundling, provide the single products as options as well.
The individual products can act as an anchor, meaning they will make the bundle appear far more attractive when the prices are compared to the bundle’s prices. Just make sure the bundle is less expensive than the individual items added together.
Capitalise on demand
Of course, you can always incorporate a dynamic pricing strategy and raise prices with an increase in demand.
If you notice that you’re selling a ton of a certain product, increase the price. Products in high demand tend to be less price elastic, meaning that changes in price won’t affect the quantity demanded.
If economics has taught us anything, it’s that retailers can afford a price increase that coincides with an increase in demand. Test your price increases with your most popular items, it will give you the best idea as to how your customers will react.
Doing this will make sure you capitalise on every penny possible. Increasing your price to meet demand will make slim margins a thing of the past, and help you boast impressive numbers at the end of the quarter.
So as you can see, justifying price increases doesn’t have to be hard. Of course, there are other factors that go into it. Retailers face different costs, and hold unique relationships with their customers.
Maybe the best way to afford price increases is establishing valuable brand equity first. If your brand is successful, many customers will not want to leave your store due to a slight price increase.
Boosting your profit margins doesn’t have to result in losing customers. Retailers should experiment with different services and bundles before sticking with one to justify price increases.
However, there’s no need to sell yourself short. If your brand is valuable, and your customers are loyal, slight price increases will present you with no opportunity costs.