After two decades in the shipping business, David Kiger, the chief executive officer of Worldwide Express Operations, LLC, knows what he is talking about. In a recent discussion on the topic of increasing the profits of smaller businesses, Kiger offered several insights on prices, profits, and sales, including this idea: depending on the size of its profit margin, a company might incur little risk by raising its prices. Given a high enough margin, the business the company might lose could be easily recouped by the higher revenues generated from the price increase. After performing thorough due diligence in this regard, an entrepreneur might uncover some surprising possibilities.
Many other experts encourage periodic and judicious price increases in order to maintain solvency over the long-term economic cycle. Thinking strategically is key. When raising prices, consider rebranding or renaming your product to reflect the added value it delivers over competitors’ offerings.
Also think about possibilities for including helpful extras in your product’s packaging. An instructional book or DVD included with your electronic equipment, for example, tells your customers that you are an important source of information and support.
Communication is also vital. Research demonstrates that when people receive a sensible explanation of why change is necessary, they accept the change more easily. Let your customers know how hard—and how intelligently—you are working to earn their continued loyalty through the improvements in functionality and customer service that accompany your price increases.