Following on from our blog on different approaches to pricing, we turn to good practice around implementing a price review.

We will assume that the business has already decided on a way to approach pricing, but if yours has not we refer you to the previous blog: https://co-accounting.co.uk/blog/pricing-zdxsz

fix a routine and stick to it

All businesses at least need an annual price review.

For some businesses, especially those in manufacturing, where profit is particularly sensitive to input costs, we may well need to review more frequently, but an annual review should be a minimum.

The problem with leaving price reviews longer than a year is that when we eventually do come to do one, we may find that the increase may be much greater than inflation which is generally what customers will expect. At that point you have a problem to explain the increase.

So above all we need to be extremely rigorous about sticking to our schedule and not missing a review.

Having worked with hundreds of businesses on their profitability we know that the number one reason why most small businesses are unprofitable is due to not charging enough. We also know that the number one reason this persists is that the business owner procrastinates about increasing prices, fearful of the reaction from customers.

If we can only get across one message in this blog it would be this: implement an annual price review and stick to it.

be transparent

Don’t be tempted to hide your price increase. The price increase will never be good news for your customers but we risk upset if we try to hide them in some way.

Equally we do not need to make a song and dance about them either, after all at some point price reviews are inevitable in any business.

Remind people what they are getting

Your business makes a difference to the lives of your customers. This is an excellent opportunity to remind them of the value your business provides.

prepare for a reaction that may never come

In most cases, the prices that small business set are reasonable and most customers understand the increase, in fact it is not uncommon for price increases to get no reaction whatsoever from the market. Nevertheless we recommend to prepare because if we are unprepared, one disgruntled customer risks us backtracking on the whole exercise.

We need to bear in mind that reactions may occur for all sorts of reasons, some of which have nothing to do with the price. Your customer may be simply having a bad day, or have a complaint which if resolved would mean they did not mind about the price.

For some people, yours may no longer be the right product or service at the right price. Whatever the reason, if we have thought through our approach to pricing (see: Pricing Blog), we should now be confident to stick to our new price.

Being prepared will allow us to deal with any reaction calmly. We should prepare what we communicate if someone challenges us on the value we provide and if they ask for a discount.

Whatever the communication, the end point must be that the price does not change.

manage expectations

New and existing customers need to be educated that price reviews are to be expected. That does not mean that price increases should be expected, inflation may abate or the market may change. However we should take whatever opportunities we have to manage customers expectations that price reviews are to be expected.