Raising the price of products without hurting consumers is an issue that puts many companies in a very tough balancing position. They need to come out clear on the reason as to why they are raising the price. This is because customers respond positively to increased product prices when they are satisfied that there is logic behind the move. On the other hand, they may shun the product if they feel that they are cheated or the price increase is aimed at making more profit. This essay will explain how to successfully get customers to pay more and also discuss a specific strategy that can enable successful price increase.

According quality custom essay to Ailawadi & Farris, when companies are intending to raise the price of a product, they should consider the timing.  An ideal timing is to do it when they are introducing a new product to the market. Often, new products come with some improvements and enhanced features. Customers are likely not to have a problem with paying more when they are getting an added value. The added value can thus justify the increased price.

Companies should also look at their competitors when trying to raise the price. The move to increase the price can stagnate when every company is hesitating to be the first one even when they are all facing a common cost pressure. In this scenario, the market leader should be the first one to make the move and open the path for the rest. Similarly, the non-dominant companies should raise their prices immediately after the dominant company makes the move unless they have strategic reasons not to do it. An approach where all companies move towards them same direction somehow justifies the price increase.

Upon raising the price, the companies should next look for enticing methods to contain their customers who are likely to cross over to the competitors if they are not pleased by the deal. Such methods include promotions, discounting, and offering coupons. This should include studying their customers closely to know their needs and preferences in as far as the aforementioned offerings are concerned. There are various ways through which a company can do this. For instance, it can establish an online community to create an information exchange forum for their customers or work closely with their stores to use the data that they collect during checkout. Here, they can group their customers based on their preferred purchases and sensitivity to prices. The overall aim is not to lose market to competitors with lower prices. As such, when companies are evaluating whether these plans will achieve their objective, they should take into account the major reason for the promotions.

Companies can also bundle their products to entice customers to buy them at a higher price. For example, a supermarket might consider putting various foods together thereby making a complete family meal to sell in the deli section. This will encourage their consumers to compare the pricing with that of going to a restaurant for a dinner. If the bundled products have a favorable pricing, they will definitely purchase them.

An ideal and specific pricing strategy that allows the price to be successfully raised is that instead of companies coming up with low-quality fighter brands, they should broaden or improve the features and pass the extra cost to customers. However, when doing this, they should ensure that the improved products have an attractive margin. They should also ensure that they their products look more valuable to customers. Customers compare products among competitors based on their prices and their worthiness. However, when the high price is justified by an equally high value, such a product remains attractive to customers. This strategy is known as value-based pricing. The pricing is done with respect to the economic value the customer obtains on purchasing the product. This strategy improves the company’s profits by ensuring that it can capture the maximum amount the consumers are willing to pay. For it to be effective and efficient, companies should first understand the True Economic Value (TEV). TEV refers to the amount a consumer is willing to pay for a certain service or product that has more value than its closest competitor. It equals the cost of the best alternative plus the value of performance differential. To determine the value of the best alternative, the company needs to engage its customers and inquire from them how much they would pay for an alternative to its product. This information can also be obtained from market intelligence. Once the price of the best alternative is determined, the company can go to the next step of determining the value of performance differential. This involves reviewing the extra features of the product compared to the best alternative and estimating their value to the customers. The company can use the customer survey to validate its estimates. After getting the value of the enhancement from the customers, next is to add the cost of the best alternative value and set the price. However, companies should be aware that value-based pricing works with one specific segment. Thus, for those companies with multiple segments, they should determine the appropriate value-based price for every segment.

Increasing prices of the products can enable the company to generate more revenue and profits, but it can also lead to the collapse of that company. This being the case, companies should always be careful and considerate of all factors that are involved in or order to avoid failures or even losses. Notwithstanding, with an appropriate strategy such as value-based pricing, customers can be convinced to pay more because of the additional value they will get.