Small businesses can’t hide price hikes
I was shopping at my local fishmonger the other day and my jaw dropped when I saw the price of
Rockfish went up nearly $2 a pound.
I didn’t say anything but one of the owners caught my shocked facial expression and rushed over to say two words:
“gas prices.” We both shook our heads in quiet understanding. But I still went on to protest a bit about the size of the jump in fish prices.
It was easy for me to see the prices for all the items at the fish shop. There are only about 20 to 25 products sold at the small bare-bones store, and prices are written on a blackboard.
I realized at that moment I was being a bit unfair. When I walk into a giant supermarket or department store it’s harder to figure out right away whether price tags have been jacked up. And there’s probably no one in power to complain to even if I did notice.
Small businesses have the worst of both worlds. They typically have the tightest margins
so escalating fuel prices hit them hard, and they get harassed when they raise their prices even a little bit because it’s so easy to notice.
And many are definitely raising prices, even in this tough economy. They have to.
According to
the National Federation of Independent Business, the net percent of small business owners "reporting higher average selling prices rose five points to a net 13 percent in February” from the previous month.
But how do small business owner raise prices without making their customers freak?
Reed Holden and Mark Burton, coauthors of
“Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table,” offer this advice:
"When it comes to raising prices, small businesses need to bundle services and products to create different levels of offerings. That way, customers will have the choice of: the least expensive product -- which does not come with a lot of additional services and features; a mid-priced offering -- which has value-added services and benefits; and a high-priced offering, which is the most desirable and the one many mid-level customers eventually upgrade to. By creating price differentials based on value, salespeople will be able to enter into customer negotiations with confidence.
And
Elizabeth Gordon, author of
“The Chic Entrepreneur: Put Your Business in Higher Heels,” says you can be a stealthy price raiser.
“The way to do this is to offer more value,” she explains. “For instance if you are offering service A right now, add on service AA by adding some additional value and then cut back slightly on you were originally providing for the price of A. That way you separate your price sensitive buyers from those who are not, and provide each with what they want. This makes price increases a lot more palatable to buyers, because you are not just raising prices with nothing to show for it; you are providing them with the option to get more value.”
And giving customer advanced notice also helps.
“Let your customers know through some means of formal communication, preferably a personal letter from the owner on company letterhead," she says. "Let them know two to three months before the price increase takes effect so they can plan for it. A price increase looming three months out in the future is a lot less agitating than one that is sprung upon someone right out of the blue.”
I suppose the price hike on my Rockfish would have been less painful if I had some notice. And it definitely would have been more palatable if they threw in some shrimp.
