To get to the bottom of when and why you should raise your prices and how to roll out price increases without upsetting your loyal customers, I tapped three owners for advice: Keith Alperin, CEO of Helium Foot Software in Chicago; Megan Armstrong, founder ofDogma Training & Pet Services in Calgary; and Tomaso Veneroso, CEO of metal part manufacturing firm Am Cast in Bohemia, New York.
How do you know when it’s time to increase your prices?
Keith Alperin: I have an item on my calendar to review our rates every fall. For an increase on the first of the year, my planning starts the fall before. This gives me a chance to evaluate the market and our position relative to similar firms in our field and our city.
Keith Alperin, CEO of Helium Foot Software
Megan Armstrong: We are primarily a service business, so we know it is time to raise prices when the demand of the service is greater than our ability to supply it. We also do a review twice a year and take a look at wage and overhead increases. If there have been increases, we plan how to build those into our prices.
Tomaso Veneroso: I increase the price only when I can propose something that is worth more. For example, if I can produce a new alloy state-of-the-art technology that can last twice the life of a competitor’s product, I know that it is time to increase the price because I am improving on the customer’s bottom line.
What factors are involved in pricing?
Veneroso: Pricing is a function of materials, quality and performance. If I invent something such as our latest eco-friendly machine for quarry and mining, which is capable of producing usable product from waste, how can I establish the right price? This technology is technically priceless, so I use a fair judgment to cover my costs and make a little profit. However, the price has to be fair. I certainly cannot expect a customer to pay the same price for a Ford that they would for a Ferrari.
Armstrong: We monitor the industry and ensure that we are staying at the top of the higher price level for that service. For our product lines, we typically just keep the increases in line with supplier increases.