The end of the year remains the time where many businesses plan and execute price increases for the coming year. By how much, when and what product or market scope are then key questions. By getting market facts through price research instead of guessing what are the best areas to increase in, companies can improve the likely success of such increases tremendously. It can help a business get a firm grip on what product features are more important, what customer are willing to pay for a certain product or service, and analyse what competitors are charging for their products.
2018 has been a year where tariffs were a key topic in the news. The US government imposing tariffs on Chinese goods and the Chinese government doing the same to US goods had and will continue to have serious ramifications for businesses. Even though the first round of these tariffs were for steel and aluminium, consumers buy many products that contain steel or aluminium, which also drives the price up of ordinary consumer goods. Tariffs impact consumer goods the most and businesses are left with a tough decision to either hike the prices of their products or reduce their profit margins. This will result in a decline in retail volumes for many companies, with companies such as Pepsi and Coca-Cola having to raise prices for the consumer side in order to cope with the extra costs. Tariffs have seen the average cost of washing machines in the US jump by 17%.
These tariffs imposed by the Trump administration will impact two types of companies:
The 29th of March, 2019, the day the United Kingdom officially leaves the European Union, is fast approaching. It is important for businesses to know the impacts Brexit will have on pricing for their products and how they can prepare for post-Brexit. Food prices are expected to go up after Brexit and some have even encouraged the government to cut tariffs on international products. Adding to that, a "no-deal" Brexit could have huge consequences for businesses as they risk potentially going bust in the event of no trade deal being secured. Despite this, some companies can actually gain from Brexit if they know how to retain their customers when the prices will be impacted by Brexit and thus become out of sync with consumer/customer willingness to pay for certain goods.
As we are approaching the last quarter of the year many companies look at increasing their prices for the coming year, in particular in B2B industries with cyclical negotiation cycles. But price increases are not always easy to implement and more than half of all price increases either fail outright or get neutralized by heavy discounting.
Most people working in the pricing department is aware that pricing is a very powerful tool. Yet still, when engaging with other departments or discussing the overall strategy of the company, price improvements are sometimes ignored, or at least its full value is not appreciated.
We are excited to announce three upcoming webinars in June:
- June 5th: Pricing Right Made Easy - Optimizing prices with research: learn about how to use price research when setting prices, including using different research methods. See how segmentation along customers' willingness-to-pay can drive superior profits..
- June 12th: Value-Based Pricing foundation done right: Conjoint Analysis: Build a solid foundation for your value-based pricing strategy by implementing regular price research using conjoint analysis. Understand value-drivers and differences in willingness-to-pay.
- June 19th: Increasing prices more efficiently with research: price increases are sometimes difficult to implement. In this webinar we look at how you can become more efficient and achieve a higher proportion of the price increase potential through price research.
You can learn more about each by clicking on the links and signing up. Once the webinars are live you will receive an email with a personal link to watch the streaming video, at your time and convenience.
Take the Guesswork out of Pricing
Do you have the right price for existing products or services? Do you know what the price should be for a new product yet to be launched? Are your customers willing to pay more for a given set of benefits? If you measure willingness-to-pay scientifically you will be able to answer all of those questions. Yet, still 88% of all companies admit that their pricing process is at least in part based on guesswork, without knowing what customers value and how much they are willing to pay for an overall product, or for a given set of features.
This is the time of year when many companies are planning or executing price increases for the new year. Some are successful and reap considerable improvements in profitability. Others have difficulty in making the price increase stick. And others simply fail to implement a price increase.
Over many years working in the pricing industry, I have seen a number of things that successful companies do when it comes to implementing the price increases. Here are some of those insights.
Fact: Most companies should increase their prices.
Increasing prices can be daunting, and is certainly not a fun thing to do. Customers will get angry, some will have feelings of betrayal, and there is lots of uncertainty and risk. Just how angry will your customers get? And to what extent will this anger translate into churn?
Consequently, price increases tend to be postponed or avoided, despite the obvious opportunity for a profit increase.
Chances are you are not like most companies, and therefore shouldn’t increase your prices. Doing preliminary pricing research is essential so that your price increase is an informed decision, and not just based on your intuition.