Change is a constant in life and if there’s one thing guaranteed to rise as time passes, its’ the cost of doing business for a startup in Nigeria. This might sound like good news to you but Nigerian customers feel irked when they find out they’ll have to pay more for your beloved goods and services. Example is the case of DSTV. In an online space filled with competing brands trying to poach your customers, what can you do to ensure your customers remain loyal after a price increase?
The issuing of raising prices is a complicated part of eCommerce startups and small businesses with an online store dread the day when it becomes inevitable. Sadly, there are certain factors that make it necessary to raise price if you want to keep your employees, suppliers and customers happy.
5 signs it’s time to raise prices as a Startup
Your online storefront is populated with ‘sale’ signs
Promotions and sales boost traffic but in the long run are these the type of customers you want in your store? Your company enjoys more profit when you focus your marketing on audience who values your product. Your business isn’t a charity; hence, you shouldn’t attract everyone who shows a slight interest in your product. Observe purchasing requirements and motivation for your target market and determine your price based on people in your target audience who are willing to pay for similar products. This is one of the key reasons why Jumia is successful. Though there are lots of promotions but the average price of goods on Jumia is higher than that in a regular store.
Operational cost has risen
For webprenuer startups in Nigeria, the major cost you’ll face includes web hosting, digital marketing consultation, outsourcing content marketing, web design/development, payment portal/security, among others. It’s natural for the cost of business to increase and most businesses will protect customers by covering the cost for as long as possible. Always go for web hosting, developers and marketers that provides stable pricing for a good fee. Also put into consideration that in Nigeria, one of the challenges facing small businesses and startups is constant blackouts. So the cost of doing business would definitely increase.
Increase in Customers Demand
For a startup where demand peaks during specific times of the year, like rainy seasons, Christmas and other festive periods you can increase prices. In fact, customers expect it and plan accordingly. For instance, the average price of umbrella would increase by over 30% during the rainy season.
Competitors are charging more when your product is better
As a web startup, you don’t have to lower your price to attract business. Customers buy value. If your product is superior, price is accordingly
You win every quote easily
After a year or two of doing business, if you find that you’re still winning every quote you bid for with little effort. You’re most certainly pricing your services too cheap. Quote a higher price and see how customers respond. Those who want a cheap supplier will run but consumers who appreciate quality will stay on.
As a Startup in Nigeria, How can you raise prices without losing customers?
Make the price increase part of a new sales model
The first thing to do when you want to increase prices is to inform your customers well in advance. Post it on your social media account and use signage to boldly display it on your website. It could serve as a tool to encourage rush sales before prices rise. Alternatively, if you had a policy of “buy two, get one free”, adjust the model to “buy 10 and get a package discount”. The idea is to get the customer to pay more for a better deal.
Increase the value perception
This is what Dan Kennedy calls selling money at a discount. According to Patrick Conley at Automation Heroes it is hard to raise prices without getting resistance across the board. In this situation, the smart move is creating high-value product for a distinct group of customers who’ll enjoy 10 times the value for the new fee. They won’t complain because its’ a better deal for them. Such a product should be based on your unique advantage point which gives you an edge over the competition.
Figure out the best time to increase prices
Research is essential to price increase because it helps you determine a time when your audience and customers will be amenable to a price hike. January is usually considered a bad time to increase prices because most people are reeling from all the Christmas expenses they’ve made.
Conduct research on your rising price cost such as price of shipping, production, materials, packaging and more. You also need to stay on top your sales levels and profit margin. Your bestselling product is always a good candidate for a price increase. If you sold a product at a lower price to attract attention, monitor sales to know when it’s’ time to set a price that reflects the true value of the product.
Forget soft cushion, just raise your prices
Raising prices gradually to soften the blow of a price increase means you’ll be doing it regularly which raises problems with your customers. Its’ easier to explain price increase when it’s done at once. Ensure that your prices remain competitive with offers from similar brands who offer same products.
Be fair to existing customers
If you run a subscription model, price increase is more difficult to roll out because you have customers who’ve designed their business operation and set their own prices based on your current charges. Offer to grandfather in loyal customers. When Chargify switched from a freemium to subscription-only service. The social media backlash was so terrible, they were forced to reduced prices. The new prices was justified yet people felt cheated because they built their business on a price model that suddenly changed without a grandfather clause to maintain prices for existing customers.
What is the risk for the customer?
Some startups know it’s time to raise prices but fear they’ll lose customers even when that rarely happens. What steps would the customer take to find another vendor of repute who offers competitive pricing? Most times, the effort isn’t worth it and they’ll stay for peace of mind and great quality you offer.
Businesses exist to make profit and they can only do that when they deliver excellent products at the right price. Be honest when explaining the reasons for the price increase but never apologize. Offer additional perks to sweeten the deal and ensure you communicate with your customers before any upward price review.