In many ways, and in many industries, prices have been on the rise for some time now. However, it seems they're hitting much closer to home now than at any time in the recent past. If it's not the first thing you think about every single business day, it soon will be. What will you do? How will you cope? How will your customers react if you raise prices? How will your competition react? How will they both react if you do nothing?
Pricing is the single most critical aspect of your overall marketing mix. A small, almost miniscule nudge in either direction could have enormous negative or positive repercussions for a long, long time. Consider that, according to a recent study by the international consulting firm McKinsey & Company, a price increase of just 1 percent net across the board, earns an 8 percent increase to your bottom line profits over the course of a fiscal year. That's quite a ratio. And, it should get your attention.
Recently, I was made aware of a delivery surcharge being implemented by a large, independent chain of parts stores in a metro area. A key customer threatened that it would take all of its business elsewhere if the surcharge was applied to its invoices. The parts store didn't budge, and risked losing the business. However, every single parts store supplier followed suit with surcharges of their own, and the large customer had no choice but to accept the additional fee from its current source.
The point of all this is to encourage you to take a very serious look at your costs. If you're like me, you'll notice that in almost every way, costs are on the rise. This is accentuated by the fact that a very popular cost barometer, the price of gas, is making national headlines every single day. Other raw materials have been more severely impacted, but they have nowhere near the across-the-board impact of the almighty price at the pump.
Having gas prices soar is not a good thing. However, its impact on the consumer psyche does offer service businesses the opportunity to adjust their own pricing in an effort to maintain or grow profits and offset their own cost increases. Having a bellwether consumer price gauge, such as the price of gas, go up so dramatically and so quickly offers our industry (and others) a rare and unique opportunity indeed: the ability to adjust prices with both cost justification and customer empathy in place. Rarely is there an almost perfect confluence of circumstances that so boldly empowers you to analyze and adjust your pricing.
According to statistics from the National Federation of Independent Businesses, 35 percent of small businesses raised their prices this past March, up 30 percent from a year ago. These are small, consumer-interactive businesses just like yours.
By virtue of the gas-price scenario, consumers are aware of the cost pressures you're facing. Now is the time to properly analyze all of the factors at play, and do what's best for your business. The repercussions from your customers and competition just might surprise you.