Why an annual price increases MAY
make good business sense!
by Julie Shepperly
Do you agonize over when to raise your prices?
Do you find that some clients are charged one price while others another?
Has it been well over a year since you raised your prices?
Are you afraid you will lose too much business?
Does the economy have you reluctant to raise your prices?
If you answered yes to one or all of those questions rest assured that you are not the only one. Price increases are often synonymous with a visit to the dentist; often dreaded and painful. However, when you learn to step away from the emotion and look at the facts you can often muster the strength to raise your prices.
Make no mistake; raising your prices isn’t something that you do arbitrarily. You must have a method or system for when and why you raise your prices. We often find that owners and technicians are unsure or even fearful of what they should be charging for their services. Instinctively and logically, you probably are aware that price points are dictated by an analysis of the overall expense to run your business as well as a consideration of supply and demand. However, due to fear or a lack of understanding, completing a comprehensive price analysis is often skipped. Plus, many of us will avoid the overwhelming feeling of “not knowing” and therefore skip the necessary work. Often, the result is falling back on the simpler method of establishing pricing by calling the competition. Unfortunately, there are some major flaws to this system.
What should my prices be and when should I raise them?
When you are setting your prices, you should determine your pricing based FIRST and foremost on what the business requires to be profitable and SECOND on supply versus demand. Ultimately, what you charge is secondary to the experience that accompanies the price. Customers buy two things: good feelings and solutions. You must consistently provide an experience that elicits pleasant feelings as well as solving the client’s challenges. The trick is consistency! Customers will gladly pay the price if their expectations are continuously met and/or exceeded. Remember, customer service begins when, and does not begin until; you’ve exceeded the client’s expectations. Be sure that your systems for service match your price, and pricing concerns will become obsolete.
If you are not at the profit level that you want or need to be, you’re confident that you provide consistent service experiences and your repeat business is consistent (meaning you are pre-booking at 75% or more) then you can rest assured that an annual price increase minimally is necessary if you ever want to increase your profitability. For many salons and spas the minimum price isn’t set high enough to even reach profitability. Raising prices annually can sometimes be the only option to reaching profitability. For more information on how to set pricing for profit check out Milady’s Financial Analysis and Coaching Tools (FACT) CD-ROM for a workbook and spreadsheets designed to help you increase profitability.
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Author, consultant, educator and award winning stylist, Julie Shepperly has a wealth of experience as an educator and consultant for some of the leading names in the industry. Julie is particularly skilled at engaging and motivating her captive audiences worldwide. Her passion and enthusiasm for serving and supporting individuals to reach their full potential drives her every action. For over 17 years Julie has developed and delivered hundreds of programs specifically designed to unleash ones own personal power, profit and potential! It is through her genuine enthusiasm, honest commitment and bottom-line approach that Julie Shepperly ranks as a favorite of favorites among salon and spa business owners and technicians.
Provided by Milady, a part of Cengage Learning www.milady.cengage.com