Pricing Strategy: When the Price (Hike) Is Right

by Inc.

Afraid to raise prices? Not only does business sometimes call for it, your customers also may not mind as much as you think.

If a company’s cost of revenue is creeping up it may be time to consider charging more for its product or service, writes Erik Sherman in an article for Inc.

Using internet music company Pandora — whose “cost of revenue and content acquisition expenses are 77.7% of its gross revenue — as an example, Sherman argues that “sometimes you need to face the music and ask customers to pay more.”

“When the cost to provide goods or services is too high, you lose money” Sherman writes. “You have two choices: decrease costs or increase revenue.” Instead of assuming a price hike will send customers running, Sherman suggests companies run surveys or gauge reactions to price increases in a limited product line or at select locations. “Do some testing and questioning and you may find that the only person afraid of higher prices is you,” Sherman writes. For more advice on pricing strategy read the full article here.

Related Content from OpenView:

Pricing is about more than just a “number.” Getting the pricing model right is all about the price structure and details. Read this post for a 10 step program to a better pricing model. And for advice on how to determine whether your product pricing strategy formula has gone bad visit the OpenView Blog.