MBA1535 Q&A Wednesdays: Should I raise my prices during a pandemic?

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Visit Dell.com deals. Hey O welcome to the Hundred Dollar MBA show where your business problems get solved every day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholme. I'm also the co founder of the Hundred Dollar mba, a couple of business training and community online and Today's episode is a Q and a Wednesday episode. On our Q and A Wednesday episodes I answer a question from one of you, one of our listeners. If you have a question you want to ask, just email me over at omar100mba.net and I'll answer right here on the show. Today's question is from Fred and Fred asks, should I raise my prices during a pandemic? Fred writes in and lays all his cards on the table. He says I'm not making enough revenue. I need more revenue for my online business. I I can't afford to get new customers via paid traffic so I need to raise my prices. But is it a bad time to raise prices during a pandemic when money is tight everywhere? Any help would be appreciated. Thanks. That's a very solid question Fred, and it's a very timely one. I'll be answering it in today's episode. We'll explore raising prices in general as well as during a critical time like this is Raising prices, really a big deal? How much will it affect your customers? What does it mean for your current customers versus new customers? And also, are there any other ways to increase revenue other than getting more customers via paid traffic or raising prices? We explore all that and more in today's episode. So let's get into it. Let's get down to business. In today's Q and A Wednesday, Fred asks should he raise his prices during a pandemic? And he actually brings up a point. Says, hey, I can't afford paid traffic to bring in new customers, so I have more people buying from me. So therefore my only option is to raise prices. Well, that is one of the options. But there are other options. I would say one more solid option that you can explore. So let's talk about that first before we talk about raising prices. There are three ways you can increase revenue. One, raise prices. Two, get more people to buy from you, or three, get more people to buy more from you. Meaning you want to increase the average revenue per customer. And that doesn't necessarily mean raising prices on all your products or services. It just means you're getting them to buy more products and services. So say, for example, you're selling an online course. I might buy an online course from you, but why not buy more than that, a second online course or some group coaching, or maybe some one on one coaching. These are all separate products. I'll be spending more money as one single customer. This increases your revenue in total because you're getting more money out of each customer. So my recommendation, especially during a payment pandemic, is to try this strategy first before raising prices. Why? Because not everybody is struggling during this time. I know it may not seem like that because of the news and because of what's going on on social. And you know, a lot of people are losing their jobs, which is true. But there are a lot of people that are okay economically. They haven't stopped spending money, they haven't changed their spending habits. Some of them are actually doing well. Some people are in industries that are thriving during this pandemic. And by offering more for all your customers, offering more for them to buy, this allows it to be an optional opt in kind of situation. But when you raise prices, everybody's affected. So my first move would be, you need to add more value to your marketplace, meaning you need to add more value to your customers. What else can you offer them? Another product, another service, another offering? You, you have an existing customer base. You can email them, you can message them, you can market to them. And Say, hey, by the way, we just launched a new product, we launched a new opportunity, we're opening the doors to a private coaching group and it's closing at the end of the week. This gives you some injection of cash, gives you a chance to raise a bit of money, get some revenue, and you're offering something to existing customers that already love what you do. They've already built a relationship with you and they want more, they want to keep growing, they want to keep getting help from you. This is actually a very, very high converting strategy. Why? Because it's a lot easier to convert somebody who bought from you than somebody who has never heard of you. Hence the paid traffic idea. Look at your own spending habits. I'm going to give you a perfect example. We're a customer of Intercom, which is a messaging and customer support software for your website. I went into Intercom, started using Intercom as a ticketing solution, a customer support ticketing solution alternative to Zendesk. We started using it for that and then we said, hey, why don't we move our knowledge base into there? Because that way it'll be integrated and we can give tutorials straight into our customer support messages. So Intercom had these products available for me to buy. They suggested them to me. They then said, hey, looks like you got a lot of volume. How about a resolution bot, which will allow you to answer automatically some of your most frequent questions, lowering your response time and really making your customers happy. That's another product, an add on something I bought from them. So I'm already paying them. I'm happy with what they give me. They keep offering me things I need. As I grow, they're solving other problems in my business. So I'm continuing to go back to Intercom, buying more and more things month after month because they have something on offer. I would not spend my money if they didn't offer it to me. If I was unaware or they didn't even have these offers or features or products, I would not spend my money. So a lot of us think, well, no one's going to spend money on it. Well, you haven't even offered it to them yet. So offer it. Offer a new product, a new service, a new feature. This is a very easy way for you to increase revenue without disgruntling customers with raising prices. Now let's get into raising prices. First of all, if you must raise your prices to keep your business afloat, then you gotta do that. You just. There's no if, ands or buts about it. Your job As a leader of the company, to do is best for the business. You gotta keep your business alive like it's a baby, right? You gotta feed your baby. So if you must raise prices, there are a couple ways you can do this. One, you can grandfather your current customers and they can keep their current pricing. And then your raised prices, your new increased prices are only applicable to new customers. That's one option. Number two, you can do something called a grandfather discount, meaning that, hey, we are raising prices, but you guys are awesome, we love you. We're gonna give you the same prices you have now until the next six months. And then after the six months are up, we're gonna give you a discount on the new pricing to say, thanks for being so loyal. This is also a great option. And then there's the option of, hey, no grandfathering in you increase prices for everybody across the board, current and new customers. Now, the first and second option are really good, especially if you're starting out. You don't have a huge market share yet. You have, you know, under a thousand customers, let's say, and this is a reoccurring, let's say a reoccurring charge, not a single product. But once you start getting past a thousand, two thousand, three thousand customers, you know, the grandfathering can cost you a pretty penny. And it's going to make a big difference if you at least go with a grandfathering discount. Now you know your business best, but either way, you're increasing prices to new people and that can make a big difference. Now I want to say something. Price increases make a big difference for your business, but they don't necessarily have to make a big difference for your customer. Most customers don't really mind a price increase if it's not that drastic. If you increase your prices by 10, 15%, it doesn't really make a big difference for the customers. So much like say, for example, you're paying $100 a month for a service, and then you start to charge $115 for the customer. That seems like almost the same price. It doesn't really make a big difference in their mind. Especially if you're improving the product, you're constantly updating it, you're adding more value to it. So therefore, you can charge more. But for you as a company, as a business, an increase of 15% in revenue is huge from each customer. It's going to make a big difference. Now if you're looking to increase your prices beyond that 20, 25, 30, 50, 100%, you're going to Lose some customers. But what you have to do is you got to play the numbers again. We've got to do what's best for our business. If I increase our prices by 100, double my prices, how many people will leave me? Let's say for example, 30% leave me. But hey, I'll be making twice as much. So I net ahead, I net more money. You got to do those numbers and figure out what's best for your business. But these are some options for you when it comes to raising your prices. And by the way, if you have to raise prices, even if it's 10% or even if you're doubling your prices or tripling your prices to keep your business afloat, that's what you got to do. If you've tried other things, if you tried adding more products, if you tried add ons, if you exhausted all your efforts and raising your prices is your only option, then you gotta do it. And by the way, most people that raise their prices, they feel so much better once it's over because they realize it actually doesn't do as much damage as they thought it was or it's going to be as traumatic as they thought it was going to be. You're really emotional about your business. Most consumers are not. They just see this as a service. If they think it's worth it, they pay it. Now, having said that, I highly recommend along the way, as soon as possible you communicate these changes to your customers. Let them know as much as advanced as possible, not a few days. If you can give them a few months even that's even better. A great heads up. Communication is key when you're changing prices. And if you could do it, even if you publish a blog post explaining why you got to do this, so you can continue to add value, so you can continue to serve your customers, to just be honest, hey, I need this to grow the business to continue to be able to serve you. It's going to make a big difference if you communicate honestly with your customers. I've done this several times and even shot videos communicating this to customers. And it's worked brilliantly because hey, people love honesty. They want to know what they're dealing with. And if you're honest with them, they'll respect you for it. Gas, snacks, tolls.

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Wrap up today's Q and A Wednesday's question from Fred, Should I raise my prices during a pandemic? Well, we explored other options, selling other products, other add ons to customers. But if you have to raise prices, you can have a few options. In terms of grandfathering people in grandfathering discount. We talked about raising prices for everybody and how raising your prices from 10 to 15% is not really a big deal for the consumer. It's probably bigger in our head, but it makes a big difference for us and our bottom line. So if we have to increase beyond that, that's okay too. Just communicate it. Do the numbers. Find out where the threshold where you net more revenue versus how many customers you'll lose. Business is never easy. Price changes sometimes feel a little bit hard because we don't want to lose our customers. But we got to do what's best for our business. Fred, I commend you for sending this question today on Q and A Wednesday. I hope I've helped you. I hope you do well with this transition in your business. If you're listening and you have a question you want to ask on Q and A Wednesday, email me over@omar00nba.net I'll make sure I answer right here on the show. If you have any other suggestions as well for the show, leave us an iTunes rating and review. We'd love to hear what you think of the show. It also shows other people why you tune in. And while you're at it, hit subscribe so you don't miss a beat by hitting subscribe on whatever you use to listen to podcasts, whether apps, Spotify, Stitcher Radio, Apple Podcasts. By hitting subscribe you automatically get our next episode as soon as it publishes. Also, it gives you access to our over 1500 business lessons in our archives, completely free. The only way to get access is to hit subscribe to do that right now. Before I go, I want to leave you with this. If you haven't increased your prices in years, you need to actually think about this. Even if you're doing okay in this economy, I'm sure your business has improved. You're adding more value. And of course there's inflation. You got to make sure you you're constantly updating your pricing every few years. Why? Because it allows you to grow. It allows you to expand, allows you to give more to your customers. It's only fair. And it allows you to make sure you don't have to wait until it's a dire situation and then you raise prices. You're kind of ahead of the game. Thank you so much for listening, and I'll check you in tomorrow's episode. I'll see you then. Take care.

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