Your motivations to serve and help I hope are pure, yet you and every other business owner would not be telling the truth if they said that they did not run a business for money because a business without money is a business that will fail. Successful businesses will always put its customers at the heart of all that it does, we call this process Inbound Marketing, and this people-first approach helps to turn strangers into promoters, but what underpins every business and allows it to fulfil it's mission is profits.
A business that is making money will have healthy profit margins and working with those margins enables it to work flexibly, react to upturns and downward pressures as well as better serving existing and future customers. Often, there comes a time when businesses need to increase revenue and have to increase their eCommerce website prices, but understanding how to increase your website prices and break through a higher price ceiling can prove a sticking point for many.
After all, you have customers, many of which will return to you time and time again but you know that the main reason they shop with you is that they are either getting their product at the best price or they are loyal to your business or maybe both. So, if you increase prices, you may worry that those same customers will go elsewhere because why would they continue to pay higher prices... right?
For those that have got this far and are undeterred I've got some tips for you that will enable you to understand how to increase your e-commerce profit margins while keeping customers happy.
Introduce subtle price increases
If you double the cost of an item overnight, you can be sure that your customers will disappear just as quickly. However, if you increase your prices slowly then the increase is not that noticeable and if it is, then customers are more than likely going to go along with it because they trust your service. So, for example if you sell a £50 product or service you could increase the price by £2 to £52 and 6 months later increase it by another £2 to £54. This slow increase might go unnoticed or it might not bother buyers too much due to the small incremental increases but it will increase your profits.
This process is perfect for items which are expected to last at least 6 months at a time as the long length of time prior to your returning customers coming back and seeing the slightly higher prices won't be too jarring.
To do the maths, if you sell that particular product/service 250 times per month the example above will generate an extra £500 per month over the first 6 months. Then £1,000 per month over the base price for the next 6 months. An extra £9,000 created revenue.
To round it off, that's a 6% increase in year on year revenue for a task that will take you all of five minutes. Nice.
Follow the 20% Rule
There is an unwritten rule in the world of e-commerce whereby businesses can increase their prices right now by 20% without worrying about the drop in sales. Go ahead and try it, be brave.
While the number of sales may drop, it may not matter because the drop in overall sales volume is generally offset by the increased monetary exchange from each product sold. This tactic works very well when coupled with a strong eCommerce Inbound marketing strategy to increase website traffic.
It also gives the business the chance to 'prove' that this is the new price bracket for this product and can actually work to attract customers who actually want to pay more for their items. Shoppers can be broadly split into budget or value shoppers and luxury shoppers however, there is a fuzzy middle where many people will hold the belief that if you buy cheap then you end up buying twice, so long as it's not too much more than the other options on the market.
This tactic is something that newer businesses should consider implementing as they are coming close to the VAT threshold.
Offer Customers More
One effective way of piercing through the price barrier is to offer customers more value. Customers love nothing more than feeling as though they have got more for their money and is a very effective way to increase prices. So, once you announce that you are increasing your prices, douse the disappoint by explaining that you are going to offer more value in the form of more products, enhanced aftercare, bundled products or extended warranties.
Remember to put a positive spin on any correspondence which you send out, and be sure to highlight the increased happiness and/or peace of mind that your customers are going to experience as a result of your new and improved service/product.
Introduce a More Expensive Model
There is an advanced way to increase the price of a high sales volume widget and that is to introduce a more superior model. While initially is may sound counter productive, if you offer a premium product at a higher price, it causes your customers to believe that the advanced model actually warrants a higher price.
This big difference in price bracket can have two benefits. It allows you to realign the price of your high sales volume 'lesser model' to be a little higher and just a little closer to the premium product thus making you more money. And, sales of the premium model while slower than the original can attract a much higher profit margin making it more than worth your time in product research and development.
Introduce a Lower Model
It might not make immediate sense to introduce a lower priced product but if you do this, it enables you to increase the price of the existing product or service. What you are then effectively doing is creating a ‘new' premium model from the existing model and this is where you can push your prices up.
With any price increase no matter how subtle be sure to monitor your sell rate to be sure that you are not doing any long term damage to your bottom line. Items or services with a faster sell rate can be given less time to monitor results but be sure to give at least 14 days to 6 months in order to get enough data sets to be sure that you are making business decisions based on data as opposed to gut instincts or knee-jerk reactions.
Increasing your prices might seem like a daunting move but at some point, you are probably going to need to put your prices up. The key to doing this is to ensure that you do not shock your customers into going somewhere else by enhancing value and making them feel as though they are still benefiting from shopping with you.
Breaking through higher price barriers is a very effective way of putting extra revenue into a business, however, it isn't the only way. Another option which you could consider would be to increase your websites Average Order Value and, the tactics involved their are similar in their outcome (increasing website revenue) but it's perhaps a little more subtle.
Ultimately, for best results, implement a mixture of the two and find a balance which suits you.
We absolutely love the topic of website sales, and if you wanted to discuss the tactics discussed in this article and how they can relate to your specific business then feel free to reach out to us for a quick chat.
I believe in creating time. Time for myself in the form of a business I can run from anywhere. Time for our clients and potential customers who seek to avoid decision fatigue and know that they have a team of enthusiastic marketers who are in their corner, fighting just as hard to make their business as successful as they are. Simply, I take complex marketing techniques, simplify and then automate them.