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Perhaps it’s happening to you. Or, maybe you’re already implementing it in dealings with your customers. Or, perhaps, you’re sitting there contemplating just how you’re going to deal with it.
Prices are on the rise. In many ways, and with regard to many industries, they’ve been on the rise for some time. However, it seems they’re hitting much closer to home now than in the recent past. If it’s not the first thing you think about every single business day, it soon will be.
What will you do? How will you cope? How will your customers react if you raise prices? How will your competition react? Or, how will they both react if you do nothing?
Pricing is the single most critical aspect of your overall marketing mix. A small, almost miniscule nudge in either direction (up or down) could have enormous negative or positive repercussions for a long, long time. Consider that, according to a recent study by the international consulting firm McKinsey & Company, a price increase of just 1 percent net across the board earns an 8 percent increase to your bottom line profits over the course of a fiscal year.
That’s quite a ratio – and it should get your attention.
Recently, I was made aware of a delivery surcharge being implemented by a large, independent chain of parts stores in a metro area. A key customer threatened to take all of their business elsewhere if the surcharge was applied to their invoices. The parts store didn’t budge and risked losing the business. However, every single parts store supplier followed suit with surcharges of their own, and the large customer had no choice but to accept the additional fee from their current source.
The point of all this is to encourage you to take a serious look at your costs. Costs are on the rise. This truth is only accentuated by the fact that a popular cost barometer – the price of gas – is making national headlines daily. Other raw materials have been more severely impacted, but they have nowhere near the across-the-board impact of the almighty price at the pump.
Having the price of gas soar is not a good thing. However, its impact on the consumer psyche does offer service businesses the opportunity to adjust their own pricing in an effort to maintain or rebuild lost profits and offset their own cost increases. Having such a bellwether consumer price gauge go up so dramatically and so quickly offers our industry (and others) a rare and unique opportunity indeed: the ability to adjust prices with both cost justification and customer empathy in place. Rarely is there ever an almost-perfect confluence of circumstances that so boldly empowers you to analyze and adjust your pricing.
According to the National Federation of Independent Businesses, 35 percent of small businesses raised their prices this past March, up 30 percent from a year ago. These are small, consumer-interactive businesses just like yours.
Because – by virtue of the escalating gas prices – consumers are aware of the cost pressures you’re facing, now is the time to analyze all of the factors at play and do what’s best for your business.
The reaction from your customers and competition just might surprise you.