The world has changed a lot over the years, from supply chain issues and inflation to dynamic pricing, where prices go up when demand is up. Your pricing strategy should be changing with the times, but how do you increase your prices without alienating your loyal customers? If you’re looking ways to raise your prices and not lose customers, you may want to try the following pricing strategies.
1. Educate your customer.
Your products or services may be more expensive than your competitors or more than what the average shopper expects – maybe your restaurant spends more money on ingredients, or as a manufacturer, your products are top quality. If that's the case, you may want to explain to customers why your prices are what they are.
For instance, Jon Sica, chief business officer at retail franchise Batteries Plus, says the company tries to make sure that, rather than assume the public is as up to speed on batteries as they are, they explain to their consumers why a good battery is a good battery, either from their staff or from content on their website.
“Batteries are one of the few products where you frequently get what you pay for,” Sica says.
So that can be a problem if a customer wants to get a good, long-lasting battery but is focused on buying the cheapest price they can find.
“Many customers have a hard time differentiating between a $25 battery and a $5 battery since they look the same on the outside,” Sica says. “The difference is the higher quality battery has better commodities inside it, which allow it to last longer and perform better, giving you a better value in the long run.”
Sica says the company has “robust proprietary training tools” for their staff, and the store also has a blog on the company’s website full of information on the products they sell.
Although not every customer will agree with this strategy, some will understand the concept of getting a better value for a higher price – that's why consumer education can be so important.
2. Bundle products and services.
Bundling is a classic pricing strategy. It can be popular with insurance companies, but other businesses do it, too. For example, companies with multiple streaming services or video game companies that make a lot of games will sometimes bundle their titles. Bundling is when you buy two or more products and the individual price becomes cheaper, which can help encourage shoppers to buy more. Supermarkets do a form of this when encouraging shoppers to buy, say, three 12-packs of soda for $10, when individually they cost $5 each.
“Customers receive a bargain by purchasing the bundle, and the company has higher sales,” says Stacy Mastrolia, an associate professor of accounting with Bucknell University's Freeman College of Management in Lewisburg, Pennsylvania. Supermarket pricing aside, “companies that use bundled pricing want to penetrate their market deeper by selling multiple different products to customers,” Mastrolia says.
3. Offer a pricing program.
You may consider creating a loyalty program that rewards members with lower prices the more they shop. The reason you see so many companies with a loyalty program, from fast food to supermarkets to department stores and clothing retailers, is because it works. PYMNTS, a media company that focuses on e-commerce and online payments, surveyed more than 1,800 consumers in February 2023 and found 51% of them participate in a restaurant loyalty program.
"Customers receive a bargain by purchasing [a] bundle, and the company has higher sales.” —Stacy Mastrolia, associate professor of accounting, Bucknell University's Freeman College of Management
Even companies that sell ink and toner cartridges use loyalty programs, says Gregory Carafello, the company president of Cartridge World America. The franchise started its No Cost Printer Program for business clients four years ago, Carafello says: clients buy the printing cartridges, but Cartridge World America will supply the printers for them and cover any repair costs and deliveries.
Carafello says the company has distributed 10,000 free printers in the last four years, but in exchange, they’ve acquired 10,000 additional loyal customers.
“In essence, we took the entire printing environment from being a chore to a no-brainer with service and monitoring included," Carafello says. "This is our signature dish. and it’s really been our most successful rollout ever."
4. Have a sale for some items.
This is sometimes called a “high-low pricing strategy,” Mastrolia says. That’s when a company will offer large discounts on some merchandise but not everything. Retailers, she says, will often use this strategy, discounting some big-ticket item or offering a coupon to bring customers in.
“Customers come in for the large discount or coupon but then purchase additional items at a generally higher retail price, thereby increasing the company’s profitability,” Mastrolia says.
5. Offer individualized pricing.
This strategy is happening more frequently, says Brian Chezum, an associate professor of economics at St. Lawrence University in Canton, New York.
“Think about a shopper’s card at your grocery store. Consumers only get certain discounts if they use the card,” Chezum says.
In exchange, he says, the store knows what the consumer likes to buy, and some supermarkets will send consumers discounts tailored to their buying patterns. If a shopper remembers to use the coupons, they may be less likely to shop and spend their money at a competitor.
6. Try the classic “9” strategy.
There’s always the pricing tactic of sticking in 9s in your pricing. Instead of a shirt retailing for $36.22, you’ll often see it priced at $35.99. It’s essentially an “illusion,” Mastrolia says.
“Customers purchase the product because it is ‘more affordable,’ even though the difference is insignificant," she says.
Giving your customers a small deal can be a pricing strategy that pays off for everybody.
Photo: Getty Images
