Maintaining the delicate balance between profit and customer satisfaction is a constant challenge. These days, business owners find themselves in the tough position of needing to raise prices to maintain their business in a world plagued by inflation. In a competitive market, price changes can be a double-edged sword, potentially boosting revenues or driving customers away.
To navigate this landscape successfully, it’s crucial for businesses to identify signs that indicate it might be time to raise prices. Below, 18 Newsweek Expert Forum members share the intricacies of pricing strategy and explore the key factors that signal when your business should consider this significant step.
1. Inflation, Insurance and Interest Rates Spike
We serve the regulated public utilities industry. Annually, we research salary, labor and equipment markets to update rates. The biggest signals include inflation, insurance premiums and interest rates, which affect borrowing money and growth. Emergency response, when we do wildfire mitigation, affects regional pricing. Global networking helps us measure the pulse of what’s happening. – Nooshin Behroyan, Paxon Energy & Infrustructure
2. Production or Operation Costs Increase
One sign that it’s time for a business to consider raising prices is when the costs of production or operation significantly increases. This impacts profitability and makes maintaining current prices unsustainable. – Alan Wozniak, Business Health Matters (BHM) Executive Consulting
3. Your Goods or Services Are in High Demand
We’ve all heard the age-old saying, “You have to strike when the iron is hot.” For me, this means following the trends. Chances are if the economy is thriving and people are discreetly spending money in your industry, you should not be afraid to test the waters and increase the costs of your services. This is especially the case when your service is in high demand. If need be, you can always make adjustments later. – Tammy McCrory, McCrory Center: Behavioral Health
4. Similar Businesses Are Raising Prices
One sign is when similar businesses are raising prices around you. It’s important to always be analyzing the business environment and stay up to date on changes within your industry so quick decisions in pricing can be made. – Christian Anderson, Lost Boy Entertainment LLC
5. Your Business is Meeting Sales Targets with Ease
If the business is consistently meeting its sales targets with ease, it may be a sign to raise prices. This could mean your goods or services are priced below the market’s willingness to pay. Therefore, raising prices might be a feasible strategy, allowing the business to maximize revenue without sacrificing sales volume as long as it stays within what the market can bear. – Joseph Soares, IBPROM Corp.
6. Your Offering Has a High Market Value
In general, your price should be reflective of the value perceived by the market for your goods or services in comparison to the competition. Rampant inflation needs to be tamed, and jumping on the bandwagon to raise prices without merit will deteriorate your brand reputation in the long run. I am genuinely grateful to those that offer a quality product at a fair price. – Margie Kiesel
7. You Consistently See Positive Feedback
Navigating pricing is a fine line. In our journey, after enhancing our offerings and seeing consistent positive feedback on the added value, we contemplated price adjustments. It’s crucial to ensure prices genuinely reflect the value without crossing into profiteering. – Ian Wilding, Hangar 75
8. Your Team Members are Burnt Out
One thing you need to consider is the burden of work on your team. If your team members are getting easily burned out with the amount of work that needs to be done to provide goods and services, it’s time to raise the value and prices and put dedicated time and effort into hiring. – Ryan Carroll, Wealth Assistants
9. Your Offering Has Added Value After Improvements
It is time to raise your prices when you have improved the features, quality or overall value of your product or service. It’s important to tie the perceived value of your offering to current market norms, ensuring that your pricing structure is competitive. The key to shaping this perceived value lies in effective communication. – Gergo Vari, Lensa
10. Your Business is Not Profitable
If you’re experiencing a lack of profit after deducting expenses, it may be time to consider increasing product or service prices. It’s important to factor in overhead, productivity and employee wages and then analyze your ROI and KPIs to assess your net income. – Tammy Sons, Tn Nursery
11. People Have More Liquidity and Disposable Income
One sign it’s time to raise prices is when you always need to think about the liquidity in the economy and people’s disposable income. Right now, interest rates are high and many people are living in debt. In this environment, people are price conscious and preferences may shift down the market if you incorrectly price your product. In most cases, wait for signs of more liquidity and higher disposable incomes before raising prices. – Zain Jaffer, Zain Ventures
12. Your Inventory Rapidly and Repeatedly Depletes
The need to raise prices on goods and services could be the result of inflation, increased operating expenses, competitor pricing, market conditions, supply and demand and more. One sign that it may be time to raise prices on particular items is when inventory is repeatedly and rapidly depleted. To determine new price points, run market tests on a subset of customers before rolling out new prices. – Lillian Gregory, The 4D Unicorn LLC
13. Customers Are Willing to Pay More
One sign is customers being willing to pay more for your product or service. This means the value your offering provides exceeds the current price. – James Fox, EVBox
14. Your Costs Are Greater Than Your Profits
A business should raise prices if it begins to make less than 45 percent of its total product cost in profit. The typical business formula is that 25 percent should be on materials, 15 percent should be on payroll and 10 percent should go to surrounding costs like insurance, rent, phones and equipment. The total product costs should be 50 percent with the remaining 50 percent as profit. – Baruch Labunski, Rank Secure
15. Market Research and Feedback Are Favorable
Businesses need to consider how a price increase might impact customer loyalty and sales volume. Market research and direct customer feedback can help determine potential price changes. – Britton Bloch, Navy Federal
16. You Are Overwhelmed With Leads
It is time to clean up the pipeline when we are getting overwhelmed by the number of incoming leads and we can’t service our clients on the same level as before. For us, raising prices is equal to providing better quality service. – Krisztina Veres, Veres Career Consulting
17. Your Customers Are Emotionally Invested
Consider conducting an emotional value analysis, which is an endeavor that focuses on understanding customer responses and connections to a product or service. If acquired data denotes increasing emotional investment without a corresponding price change, then this is a sign of untapped value. By conducting this evaluation of demand, businesses can make price adjustments. – Dr. Kira Graves, Kira Graves Consulting
18. You Spend Little Time Negotiating Prices With Clients
When you spend little to no time negotiating prices, terms and conditions with current or prospective clients, it’s time to revisit your price and profitability models. And when market conditions shift—or you are operating at or past capacity—it’s time to revisit and raise prices as well. – Karen Mangia, The Engineered Innovation Group
The Newsweek Expert Forum is an invitation-only network of influential leaders, experts, executives, and entrepreneurs who share their insights with our audience.What’s this?Content labeled as the Expert Forum is produced and managed by Newsweek Expert Forum, a fee based, invitation only membership community. The opinions expressed in this content do not necessarily reflect the opinion of Newsweek or the Newsweek Expert Forum.