Death and taxes may be the only certain things in our lives, but Ben Franklin apparently overlooked price increases on the products and services we buy and use when compiling his list. Businesses are squeezed from a variety of sources as costs are increasing for ingredients, parts, labor, insurance - you name it and it is probably going up. Price increases roll downhill, or more appropriately down distribution of channels. The stopping point: The end user.
We do not like paying more for products and services, but when price increases are needed they can be implemented in a way that is palatable to customers. In a recent interview with MediaPost's Marketing Daily, Jean-Manuel Izaret, a partner with Boston Consulting Group’s San Franciscooffice, acknowledged that raising prices can be tricky in an environment in which disgruntled customers can take to social media to stir a backlash against increases. Price increases by Netflix and fee increases by banks led to a scathing response in social media that contributed to Netflix's massive subscriber loss and a retreat on planned bank fee increases.
According to Mr. Izaret, two keys to successfully raising prices in a turbulent customer environment are:
I have never heard of a business receiving a "thank you" for a price increase, and such displays of gratitude are unlikely to begin anytime soon. However, if a price increase is accompanied with a commitment to maintaining value for customers it may be understood and accepted.
- Offer a range of price points with varying value propositions for customers. If a single price point is increased, customers might view the increase as a take-it-or-leave-it proposition and opt to leave.
- Position the price increase as a necessary step, not for the company but to benefit the customer. An increase might be necessary to address a business problem, but the problem needs to be expressed in terms of how it impacts customers (e.g., convenience of product delivery despite rising fuel costs).
Marketing Daily - "Pricing and Social Media: Can Brands Push Back, Too?"