I’m often asked how we do our pricing. In the old days, I used to check everyone’s prices and then charge around the same or a bit more. But these days we do it all professionally. We work out how much the ingredients cost, how much marketing costs, how much labour costs, etc. Sometimes we stop making a certain product because it’s just not worth it. There’s no money to be made.
People say to me they can’t put up their prices. If they do, they’ll lose business. Over the many years I’ve been in business, I’ve seen mates of mine not put up their prices and today they’re not in business. They went broke.
The most important ingredient of a successful price increase is between your ears: you have to believe in the reasons behind your price increase. And so does every single member of your staff. The key thing is the selling power of your staff. That will be a large factor in the success or failure of your business.
Your staff need to understand why you have to make a profit. They need to understand the rising costs. If you see an article about the rising cost of supplies, cut it out and put it up on the staff notice board. You always need to sell a price increase to your staff first.
Pricing is all about perceived value. Whatever you do, don’t price yourself out of the market. You should look at your competition and their prices, but don’t become obsessed. The price you charge must cover all the costs of running a business and leave you enough profit to reinvest in the business and pay yourself a wage.
If you take an interest in your customer’s needs, price is irrelevant. Give them fantastic service. Don’t get too tied up in price. We often use price as an excuse instead of running our businesses better. But quality and service are remembered long after the price is forgotten.
I know in our business we have lost more customers due to bad service than due to price. Look after your customers and they’ll come back.