In a world where increased revenues are everything for your e-commerce store, you might have toyed with the idea of increasing the prices of your products.
Only, you perhaps haven’t fully dived in yet because you’re worried that increasing prices might lead to alienating customers.
In some cases, you need to increase your prices simply because your business won’t survive with the current profit margins.
In other cases, you’d like to increase your prices in order to increase your overall profits.
Knowing how you do that, though, it just one part of the puzzle.
In this post, you’ll learn:
- Methods for increasing your prices
- Why you might want to consider targeting a different customer base
- How to prepare your customer support team
- When to raise your prices
Know your value
Before you decide to increase your prices, it’s important to understand the value of your products or store offers.
This involves having a solid understanding of who your customers are and how your products improve their lives.
When you know this you’ll know not only when to increase your prices but by how much.
Think about if you ran a dollar store. You’re known for selling products for a dollar. That’s your value.
Now imagine if a customer browsed your site and saw some products for $9. How do you think they’d feel?
Not good at all.
This is why knowing where you add value is important. If you know that some of your products consistently sell out and you have multiple customers reaching out to you to ask when they’ll be back in stock, you can assume there’s some value there and this will present opportunities for potential price increases.
One of the easiest and simplest ways to increase your prices is to add more to your product offering.
This technique is usually perceived well because customers understand that in order to get more, you need to pay more.
It works well for products that already come as multiple.
This multipack from Happpy Socks is £69.99 for 6 pair of socks.
Now if they wanted to increase the price of this set, they could add in two or three extra pairs of socks.
This method of price increase works well for those who have a low cost of acquiring their products.
If you increase the number of items within a product and your profit margin stays the same, there probably isn’t much point in raising your prices.
However, if you increase the number of products and increase the price and your profit margins rise, you’re in a good position.
Let’s see that as an example:
Cost of manufacturing 2 products: $10
Cost of manufacturing 4 products: $20
Price increase $20 (for two) $30
In the example above, you’re not better off selling more products for an increased price.
Cost of manufacturing 2 products: $5
Cost of manufacturing 4 products: $8
Price increase: $10 (for two) $20 (for four)
Now, because your manufacturing prices don’t increase substantially you’re able to increase your profit by selling more products within the same package for a higher cost.
Make it smaller or offer discounts
Making your product offering smaller is a common tactic used by restaurants to save money. They’ll keep their meal prices the exact same, but decrease the size of the portions.
This way they save money on produce.
The same strategy, however, can be used within e-commerce. It again lends itself to products that naturally come in multiples.
In this example, you can buy 12 pens for £5.00
Now if Paperchase wanted to increase their profit margins, they could keep the price at £5.00 and reduce the number of pens to 10 or even 8.
This way they make more money for fewer goods.
You can also try this strategy by offering discounts. You increase your products prices to a certain amount but offer the customer a specific discount or free shipping to entice them to pay the higher rate.
Target a different customer base
When you first start out with e-commerce, there’s a general tendency to try and appeal to everyone. After all, the more people you target, the more potential revenue you could earn.
Once your store starts to mature, however, you’ll find that targeting absolutely everyone is the wrong approach.
Instead, you want to find a small, niche group of people who truly find value from your products.
If you’ve tried to increase your prices but haven’t found any success, it might be because you need to target a different customer base.
Bargain hunter consumers will not be receptive to a 50% price increase. However, if you market your products are premium, you’ll find you’ll attract a completely different type of audience – those that are happy to pay more.
So while you might lose some of your original customer bases, you’ll find you gain a whole new one.
If this is the strategy you use, make sure that your marketing materials (social media, blog posts, videos) reflect your new target audience.
Prepare your customer support team
There’s no denying the fact that increasing your product’s prices has a chance of receiving push back.
You might receive emails from unhappy customers wondering why something they previously bought at $10 now costs $15.
Your customer support team could quickly become overwhelmed. And if you want to increase your prices, and avoid alienating customers, you need to prepare your customer service team for this.
This could include telling customers the reasons behind why your prices have increased.
You might say something like:
We’ve increased our prices to reflect the new improved quality of our product. We’re sourcing better materials that come as an extra cost. We’d love if you could try our new product and we’re offering free shipping for the rest of the week.
If you don’t explain the reasons behind your price increase, you’ll find that your current customer’s brand perception falls.
Don’t raise all the time
When you first raise your prices and find that people are receptive to the increase, there’s a certain tendency to keep increasing them all the time.
This is bad practice.
In an ideal world, you’ll keep your prices the same for a decent amount of time in order to collect data and insight into how your customers behave.
Sporadically increasing your prices without any forethought will lead to confused customers and will provide you with a lack of sufficient data material by which to base your theories and assumptions on prices.
Are you going to increase your prices?
So what are you going to do?
We’ve covered a range of different strategies for increasing your prices, as well as looking into some of the implications you should consider.
Before you start jumping in to increase your prices, why not sit down and analyze your current profits, revenue, and prices to see where you could increase and how you will justify it.
There’s a world of better revenues just waiting for you, when are you going to get it?