The exercise of raising prices can be a tricky thing for business owners. But there are ways in which a company can raise its prices and still remain favourable among their target market. The post 4 Things Fitgear Got Right When They Announced Their Price Increase appeared first on Vulcan Post.
24 Apr, 2018VULCANPOST.COM
Unfortunately for most businesses, a price increase is often accompanied by unsavoury consumer reactions, and with good reason: nobody enjoys paying for more for a product, especially without a good enough basis.
If not done right, upping prices can lead to a business losing the trust of its clientele, which can lead to an even bigger loss in revenue—the very thing that a business owner wants to avoid in the first place.
So the question remains: can a business increase the prices of its goods/services and still retain their happy customers?
Short answer, yes it can. But more specifically, there are steps that should generally be considered when planning to undertake the very risky exercise of raising prices.
Just last week, Malaysian activewear company Fitgear announced an increase in prices for a number of their products. Among some of the adjustments included the raising of the prices of their popular Wind T-shirts from RM39 to RM55, and their Wind Daypacks from RM99 to RM145—quite sizable increases, all things considered.
But instead of courting negativity, most of the responses on their announcement post of Facebook were of a positive and understanding tone, a reaction quite the opposite of what is usually expected from a price hike.
So what did they do right?
Being transparent is a trait many customers will value.
Along with Fitgear’s announcement of their price hike came a thorough explanation of why these increases were taking place, and a detailed justification of their new prices. To prove their points, there were even breakdowns of their profit margins as well as how much their employees were earning, from the top brass all the way down to their interns.
And as expected, Fitgear’s sincere explanation of their new prices was met with largely positive reactions from their followers on Facebook, with many commending their honesty and others stating their willingness to pay for their products despite the new prices.
Now, while Fitgear showed how honesty with customers is always the best way to conduct a price hike, it must be said that this will only work if a company already has a steady and positive track record with its target market.
Looking again at the comments on Fitgear’s announcement of their price-hike, many of them were telling of the activewear maker’s consistently good customer service and high product quality, and it showed that customers were ready to fork out extra just because they had faith in the company and its products.
Now it’s easy to see how Fitgear’s price hike has turned out fine for them. By having a good reputation with customers, any future action done that negatively impacts consumers—be it a price hike or even a poor PR move—will have its blow softened by the benevolence created by the goodwill created over the years.
Think of it this way: people are willing to forgive you if you’ve done something wrong for the first time, but they might not be so ready to forgive you if you’ve a reputation for constantly making errors.
Another thing that helped Fitgear soften the blow of the price hike was the timing of their announcement—more specifically the ample notice they provided their customers.
Understanding that nobody likes an unwelcome surprise, Fitgear announced their price hike 13 days before it actually took place, and effectively gave potential customers who were thinking about buying one of their products a notice that essentially said “you still have time to get our products at the current price, so hurry”.
Also, this decision makes good business sense as any individual thinking of buying a product will more often than not jump at an ‘opportunity’ to buy something on the ‘cheap’, even if that opportunity was really just a small time frame before that something became more expensive.
Lastly, the most important aspect of hiking up prices is the value that customers associate with a brand’s product. Let’s face it: nobody is going to happily pay for a product if they don’t feel that product does not provide equal (or greater) value to its price tag.
In Fitgear’s case, it was clear that despite the rise in prices, their customers still saw their products as affordable alternatives to offerings from more well-known brands such as Nike and Adidas. This was due to their positioning from the start as a manufacturer of premium products without premium price tags, and their insistence that this would not change despite the rising costs of manufacturing and production.
And as simply shown by comparing products, Fitgear’s T-shirts with their new prices (RM55) still sit below the price points of similarly constructed T-shirts from both Nike (around RM89) and Adidas (RM84).
To illustrate the importance of value further, let’s also look at the example of Netflix, more specifically their online subscription service in the USA.
Over the past few years, the video-on-demand giant has seen the price of their popular subscription plan (the one that allows users to watch on two screens simultaneously) go up from US$7.99 in 2014 to US$10.99 in 2018.
And while reactions were less than accommodating every time a price hike was announced, Netflix’s growth over the years have showed us the importance of perceived product value: anything that caters to a need and fulfills it within a reasonable price range will always be in demand.
Netflix demonstrated this clearly by providing people with a service that made access to their favourite TV shows easier.
This ease of access was further complemented by Netflix serving high-quality, award-winning original content such as House of Cards and Icarus, which ended up positioning Netflix as the leader in its market with over 125 million worldwide subscribers in 2018.
It’s clear that in the end, the action of raising prices is more to do with remaining favourable with consumers more than anything else. And for business owners thinking of upping the prices of product or service, it’s always important to have a good idea if a price hike will ultimately be able to have a positive effect on a business in the long term.You can read more about Fitgear and their transparent approach to pricing here.
The post 4 Things Fitgear Got Right When They Announced Their Price Increase appeared first on Vulcan Post.