Strategies for raising prices

[Doran]

[The title of this post was updated by a moderator.]

With all of my supplies and expenses going up and up it is time for me to raise prices--again.  

Do you only up the prices on things based on the manufacturer.  Example:  My back bar supplies and retail went up 3%.  Would you just raise those specific things by 3%?

OR

A blanket 7%+ increase across the board to account for everything in the shop like electricity and rent that went up this year?

[RachKiv]

I raised my prices across the board. Chemical services went up $5, other services went up $2. That was last summer. I'll be raising everything again the beginning of next year. I prefer solid amounts to keep it easier tracking

[Doran]

Thanks for the idea.

[ChaCha1]

It's inevitable Doran🤔 I make sure to send a text before their next visit stating as of this date.... I'll have a slight price increase etc.... 100% of the time, they're ok with it. Being a small biz owner. You have to, or take a loss or even close down.  

[Doran]

I like the text message idea.  I'll be sure to do that.  

[TCSlaguna]

Inflation will continue to increase your costs for the foreseeable future (end of the year, if not longer). I would do a slightly larger one time increase right now across the board to give you enough room to ride it out during this time. Then in a year, you can reassess and make adjustments if needed. 

Everyone is facing the same economic pressures and have to adjust to stay in business. 

[JUYBoutique20]

Price increases are a must since shipping and supplies from vendors have gone up.  I think a larger blanket increase would take you through the rest of the year then you can reevaluate.  I do this at the beginning of the year and do a midyear evaluation to make sure what I changed is working towards the goal of my business.

[ChaCha1]

Hi Doran 🙂

In reality, cost of Living has increased in every factor. As Small Business owners, we have to flow with the economy. My thing is, our cost for Supplies, Inventory, etc increases, so should our rates. But we should also give 200% Great Customer Service..  

[Shesallthat]

I just raised mine 10% I didn’t say anything to anyone. H‑E‑B doesn’t call me or text me to let me know prices will go up. Most of my clients didn’t notice and the ones that have I just explained that my products have gone up a lot. Yea hey were fine with it

[MEDIC]

I've always been a believer in small annual price increases, usually 1-3%.  With this strategy there will be times my prices will be a slightly higher than the "going rate" but in the long run I can weather the years with heavy inflation without larger adjustments (7-10% +).  The only issue I have now is that we currently purchased a business that hasn't been maintaining an accurate cost analysis for the past several years and some of the current pricing is so off that it doesn't even cover my material cost.  I'm going have to do some significant price increases, 20-30% on some items.  I know I must spread it out over the course of 2-3 price increases, but not sure on how much or how often,  Does anyone have any advice on the best way to handle this situation?  Thanks.

[Enso]

Medic, would you mind elaborating a bit more about your business?  The best thing that we did when we raised prices ~1 year after opening was adding some nice features with our price raise.  We raised our services 10-20% because we had the clientele to do so and we knew our services were of that value. (We are a nail salon with our competitors at half of our price, so it wasn't what was market pricing but we knew between our brand, supplies, customer service that we needed to charge more and more appropriately in our niche) Ex: Pedis from $42 to $48 and Gel from $55 to $65.  We offer wine in our salon and have the license to sell, what we did instead was make the first glass complimentary along with the price raise.  We make less on wine sales, but the additional upgraded or second drink (plus the raise in prices) made it cost effective for us, especially when not every client gets a glass of wine/spritzer.  We will be doing another price increase possibly this summer because everything is going up, including that my team should be making more money in their career paths as well since other career paths/jobs are also increasing.  We will go up on price but we'll always make sure value, communication, and service is there with it and I know that looks different for every business. 

[MEDIC]

Hello ENSO, thanks for your response, in answer to your question we just purchased a small gourmet popcorn store.  We sell our custom made popcorn in our store and wholesale to a number or different grocery stores and convenience stores.  The pricing for our retail product is decent, but the wholesale pricing of the product is where the problem lies.  The previous owner was reluctant to raise prices on the chain stores because of fear of losing the business so he just rode it out.  The product is priced the same as it was 10+ years ago.  We are in the process of revamping the making and packaging of the product.  We are currently at production capacity with the present set up and it is not possible to increase production enough (with the current process) to expand our market share.  I'm hoping by expanding and re-thinking the production and packaging we can increase our market share enough to limit the price increase I have to make.  Fortunately or Unfortunately the wholesale business is 2.5 - 3 times the retail (thanks COVID shut down).  We are focusing on trying to increase the retail so it's closer to the numbers wholesale business to help offset the slim margins from the wholesale line, but that is going to take some time to build back up.  Hopefully by increasing retail sales, increasing production and market share I can get by with a just a 10% increase this year, at least that is the current strategy.  Of course we are going to keep up an open and honest communication with our wholesalers but it's a little more difficult to convey this when you're talking with larger chain style businesses. 

[Enso]

Dorian we replied to a user reply below, I feel as the respond would work for the OG question as well. I will copy and paste my reply:

The best thing that we did when we raised prices ~1 year after opening was adding some nice features with our price raise in June 2021. (We announced it End of April since our books fill up 30 days ahead) 

We raised our services 10-20% because we had the clientele to do so and we knew our services were of that value. (We are a nail salon with our competitors at half of our price, so it wasn't what was market pricing but we knew between our brand, supplies, customer service that we needed to charge more and more appropriately in our niche) Ex: Pedis from $42 to $48 and Gel from $55 to $65.  Our neighboring salons prices for pedis are around $25-30 yet we stay completely booked even after the price raise. We offer wine in our salon and have the license to sell, what we did instead was make the first glass complimentary along with the price raise.  We make less on wine sales, but the additional upgraded or second drink (plus the raise in prices) made it cost effective for us, especially when not every client gets a glass of wine/spritzer.  We will be doing another price increase possibly this summer because everything is going up, including that my team should be making more money in their career paths as well since other career paths/jobs are also increasing.  When you calculate the 3% are you factoring in all cost and also possible future cost? Such as do you factor in the price raise of certain subscriptions such as amazon if you're ordering from there or the gas/toll/insurance raise to factor in traveling to pick up your beauty supplies. Will you need to pay your receptionist more to keep up with wage increases? 

We will go up on price but we'll always make sure value, communication, and service is there with it and I know that looks different for every business. There are also certain other small things that we had to adjust to save such as switching to bulk size or brands to save on cost as well!

[SparkPlug-Jake]

I used to work in a salon. It's all about setting expectations - sending texts/emails to current clients regarding the price increase, including the reason. It always helps to use the sandwich method in cases like this, i.e. always start with a compliment, then give the bad news, and finally with another compliment. And because everyone else is raising prices as well due to the inflation, we upped pricing slightly above market price and offered a 5% discount to new customers if they came back.

[Bronze_Palms]

I raised prices by 15% then coupled it with an add-on so clients felt like they were getting something out of it. Then, I created a more premium tan type and that actually is 25% more than the original priced service BUT 75% of clients book it! It only costs me $0.27 too!