Many businesses are reconsidering their pricing policies because of rising labor, energy, and supply chain costs. But when they start searching for cheaper options, it can be difficult to raise prices. However, research by McKinsey, Deloitte, PwC, and Bain & Company shows that companies often need to use a mix of communication, product enhancements, and data analysis to maintain prices.
Many Companies Raise Prices Gradually
Businesses tend to want incremental and smaller price increases rather than massive increases once. Price increases can be less obvious to customers when they are implemented as gradual changes and can enable companies to adjust to rising costs.
Paying Customers for Better Value
Bain & Company research showed that consumers generally embrace higher prices as long as they are convinced that they are going to receive better quality, convenience, or service in return. Therefore, many companies focus on value when making price adjustments.
Providing Reward Programs
PwC’s Global Consumer Insights Survey shows that there’s a positive correlation between rewards programs and acceptance of personalized offers. Loyalty benefits are a common strategy employed by companies to encourage customer loyalty during price increases.
Understanding Consumer Behaviour Using Data
Analytics and customer data are helping businesses more and more to understand buying patterns and to pinpoint areas where price hikes will have less impact on demand, according to research from Deloitte.
Providing Different Price Options
Tiered pricing strategies enable companies to cater to different customer segments by offering products or services at different prices rather than a single price, McKinsey states.
Clear Communication Makes a Difference
According to Harvard Business Review research, customers are more willing to pay more when they understand the rationale behind the increase, which could be an increase in inputs or improvements to a product.
Better Products Can Justify Higher Prices
Accenture says that it’s common for many companies to combine new functionality, more services, or extra value with their price increases to help strengthen the value message.
Subscriptions Make Price Changes
According to Zuora’s Subscription Economy Index, the recurring revenue companies tend to have more predictable customer relationships and are able to make moderate pricing changes more slowly.
Strong Brands Have More Pricing Power
In general, companies with recognizable brands and high levels of trust enjoy more pricing power than those in more price-sensitive businesses.
Great Service Helps Keep Customers
PwC’s research shows that consumers are willing to pay for a better customer experience. So, even as businesses adjust prices, they still invest in service quality.
