By Tom Trush
It was the price increase talked about around the world.
Last September, after Turing Pharmaceuticals acquired the rights to Daraprim, a medication used by AIDS patients, the company raised the price of one pill from $13.50 to $750.
Turing and its CEO were instantly public enemy No. 1. Even members of Congress demanded an investigation into the matter.
While an extreme scenario, too many business owners and entrepreneurs think they'll elicit a similar reaction by just adding a few dollars to their pricing.
Yet you can raise your prices, instantly increase your revenue and still get your clients' buy-in. You just have to be strategic in how you handle it.
Here are 3 ways to go about the process:
1. Eliminate frequent or predictable discounts.
While it's tempting to discount your products or services to increase your client base, doing so can bring big risk.
You see, discounting trains clients to normalize your products or services at a lower rate. So when you raise prices back to normal, the increase seems unfair.
After all, your clients know it's possible to purchase your products or services at a lower rate.
Discounting also deters brand loyalty because it attracts buyers who only make decisions based on price. So they vanish the moment better pricing becomes available elsewhere.
Look at J.C. Penney...
The retailer focuses so much on discounting (even eliminating sales and coupons) that the brand can't keep customers these days.
Also, understand that numerous studies prove people perceive their purchases as higher value when they pay more. So why cheapen what you offer?
Instead, consider adding bonuses to attract new customers and counter objections that might prevent new buyers from trying your product or service.
2. Rebrand to increase perceived value.
It's only natural that a used car dealership's perception is different than a luxury brand such as Bentley or BMW. So why not use a disparity like this to your advantage?
In the mid-1980s, Apple faced near bankruptcy before undergoing one of the most well-known rebranding campaigns in business history. The iMac combined high performance with a new, sleek design that paved the way for what is now a collection of premium-brand products.
Your product design, website and social media accounts are all possible places to start rebranding.
In 2013, Birchbox a subscription ecommerce company for beauty samples, overhauled its website and packaging for their premium rebranding campaign. The logo was updated to with a simpler, more modern look, while an interior "gift" box was added to the packaging with color-coded tissue paper (based on items purchased).
Last year's revenues reached an estimated $125 million.
Keep in mind, as a premium brand, you must also create an experience. Le Labo, a luxury perfume brand, handles this task like a pro.
Each perfume is hand-blended in front of the customer the moment it's purchased. The bottle is then dated and the customer's name is added.
Once brought home, the bottle must be refrigerated for a week before you can use it. This process doesn't just create an exclusive product -- it creates an experience.
So what experience can you work into your product or service -- and could a rebranding effort bring you big benefits?
3. Add your anchor.
A price is only considered cheap or expensive if you have at least one other option for comparison.
So, for example, walk the medicine aisle in Walgreens and you'll notice their own medicines look like a better deal because they're priced lower than the major brands. The additional options create relativity, which is a key component to price anchoring.
Basically, the idea is to offer higher (and, in some cases, lower) pricing to make your ideal option look more appealing. Even better if the higher priced item is seen first.
So let's say you offer a $3,000 watch. Compared to your run-of-the-mill Timex, that's a pricy timepiece.
However, what if you display it next to a similar one priced at $12,000?
All of the sudden $3,000 looks like a bargain.
In his book, Influence: The Psychology of Persuasion, Robert Cialdini tells how a billiard-table dealer nearly doubled his average table sales by using decoy pricing.
Here's the excerpt:
“If you were a billiard-table dealer, which would you advertise -- the $329 model or the $3,000 model? The chances are you would promote the low-priced item and hope to trade the customer up when he comes to buy. But G. Warren Kelley, new business promotion manager at Brunswick, says you could be wrong.... To prove his point, Kelley has actual sales figures from a representative store.... During the first week, customers...were shown the low end of the line...and then encouraged to consider more expensive models -- the traditional trading-up approach.... The average table sale that week was $550.... However, during the second week, customers...were led instantly to a $3,000 table, regardless of what they wanted to see...and then allowed to shop the rest of the line, in declining order of price and quality. The result of selling down was an average sale of over $1,000.”
Again, you simply condition your prospects to higher prices from the start, which then psychologically makes them more responsive to your lower-priced products and services.
Try one or two of the ideas shared here -- or combine them all -- and you're almost certain to increase your average sales and overall profitability.
Tom Trush is available at http://www.writewaysolutions.com
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