1.Rename your product or service and present it as if it were new
If you have been improving your product and offer an added value that your customers appreciate, it is time to change the name, raise the price and launch it as if it were new. It is not about misleading customers. Be sure that a client will never pay more for something that is not justified, but your product, deep down, is not the same. “That product that you have been selling for two years is no longer exactly the same (this is more true in services than in physical products) and it is getting better and better. It's funny because your product has changed, but you haven't changed the name, the packaging, or its price ”, says Fernando Llano.
Obsession for value, not price. Think of the technical offices of many businesses. Companies today delegate technical advice to their suppliers, and they do not incorporate all that work at the price. And they should because if they add to the product information on cost savings or on how to get more value from the item that is sold, which has a clear added value for which it is necessary to charge. It works? You have to rename your products. If you improve the product, do not put it in the same bag !!! It is clear that it is a cost, but it has an impact on the value ”, Llano puts it as an example.
If you offer a product with added value, you will be able to defend higher prices. Imagine that you sell machinery. At the moment of truth, the difference between one machine and another is that you are able to link it to a service: Yes, we are more expensive, but during the life of the machine you will have fewer breakdowns. In addition, you will have a technical service in 24 hours. Oh, and we have our own financing system, and we are going to buy back the used machine in four years ... in the end you offer a product with a service with added value for which you can charge more.
2. Play with a hairpin
Raise the price of the product you want to sell more expensively and dilute it in a price range. “Consumers perceive prices in relative terms: something is cheap or expensive depending on the perception we have of the product. And the hairpin prices help. This is what is done on the supermarket shelves: it is about inducing the choice of certain products by playing with a price range from cheaper to more expensive ”, warns Javier Oubiña. If you raise the price of one of your products, you have to ensure that in your portfolio there are cheaper products and others more expensive.
“You must be clear about the function of your products: to earn money, to get traffic, to create a brand or to hook customers.
“There are products that help you fix in the consumer's mind whether you are a cheap or an expensive brand. It occurs with white sheets in home linen brands. They don't charge a lot of margin on that product, they are competitively priced. Where they nail you is in the tiger-sheets. If you are in range with the basic product, you will also be in range with that other product ”, explains this expert.
It is the strategy that car manufacturers also use when they make a launch: 'From 8,975 euros'. Has anyone really bought that car at that price?
3. Play with the price metric
The price metric allows you to set in the mind of the consumer the unit of measurement that is used as a reference to communicate the price. You may have noticed that many technology products and services charge for months so as not to scare you with an annual fee. To continue with the example that we have used to explain how you have to consider calculating the increase, telling a potential client of a gym that they have to pay 358.56 euros per year, in addition to a registration fee of 50 euros, is not as attractive as telling him that he has to pay 29.80 euros a month. It is not that the consumer is an idiot, it is the formula to communicate the price. In the same way, it is not the same to tell your clients that you are going to raise their prices by five euros a month, than to tell them that they will have to pay 60 euros more a year. If you make an increase, you can go from selling per month to being per day: your gym, for 0.99 euros per day ...
4. Launch a Premium version of your product
You can also ask your customers that you launch a Premium version –and keep a basic version–, and that is why it costs more. There is the previous version, and now the Premium. It is the same product, but you can add a service commitment, an extension of benefits, an optional equipment and a new guarantee. Basically, you are combining the first two strategies: you rename a product with the surname Premium, and by keeping the basic version you are creating a mini-price range. Certain businesses may be interested in maintaining a basic version (which between you and me is the old one), because it can help them attract other types of customers. In technology businesses, this basic version tends to become a hook product for customers who at first cannot afford to invest much, but who will later enter the Premium version. It also serves to test the product and help decide.
But this strategy is not exclusive to technology businesses. “Remember that we consumers are schizophrenics. What on Monday you buy cheap because it is for you, on Friday you buy it expensive to look good at a dinner with friends. And it is the same product. Think of a bottle of ketchup. Which one do you buy for yourself and which one do you buy for a dinner with friends? Isn't it the same? ”, Warns Daniel Suárez, Contigo's consultant.
You can take advantage of cross-selling to raise prices: you attract customers with a hook product (with one of those products that we have already told you that will allow customers to share with other sellers and that will help to fix in their mind if you are cheap or expensive), and when you already have their attention, you recommend the product that you have raised in price. “It is about driving the consumer towards a compulsive purchase: he does not do a search to compare the price, but rather he is offered a product to try to get a boost. The more the sale is carried out on impulse, the less the price is taken into account ”, explains llano.
Suggestions. How can this cross-sell be considered? In addition to the physical position of objects in the store, with recommendations and suggestions. Think, for example, that the 29% of Amazon's turnover in 2013 came from the suggestions and recommendations of products that, precisely, are not on sale, nor are they the ones with the lowest prices. If you look at the prices of these products, they are, for the most part, expensive. Man, Amazon is Amazon, that's clear, but deep down it's about changing customer perception, and that's a strategy that any business can take advantage of.
And there is a warning: "If you have customers who only buy the hook product, there is something you are doing wrong", all the experts we have consulted have agreed.
6. Add a promotion
You decide to raise the price of the product, give it a new name and launch it with a discount promotion. The price is higher, but by going with a new promotion, it is diluted. It is a strategy for clients that you already have in your portfolio, who are not used to receiving offers.
Of course, “you must banish the concept 'free'. Promotions must be limited in time and scope. The 'free' goes against any business. He talks about 'pilots', he talks about' proofs of concept ', he talks about' promotions with commercial discounts ”, says Ramón Luis Pérez. In fact, many of the entrepreneurs who now consider raising prices do so because in their day they went on the market with aggressive promotions and promotions not limited in time, which they have not been able to raise later. If you are in that situation and you raise the price, you have to explain to the consumer that until now what we had was a launch price, to enter the market, you have to explain that "now we are in the market" and that what you offer it is "an improved product."
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