As a business owner, whether you sell products or services, setting prices can be a difficult task. Set them too low and you’ll struggle to be profitable but set them too high and you may scare away potential customers. 

And, once you finally settle on a pricing model and begin doing business, it can be a challenge to raise those prices without alienating or even losing customers. Although everyone understands that the cost of living constantly increases, if all you do is a simple cost-of-living increase on your products or services, some of your customers may disappear and the ones that accept it will likely hold a grudge. 

Instead, the easiest and most effective way to raise prices is by slicing and dicing – breaking down every item included in the original cost and then creating premium-pricing packages around some of those items. 

It doesn’t matter if your business sells products or services to use this technique. With products, it’s easy – leave the product’s price the same, but add extra fees for services such as expedited delivery, extended warranty, gift-wrapping, etc. Amazon’s pricing model is a great example of this technique – with the product being purchased sold at one price and a variety of add-on service choices available at additional costs. 

For service-based businesses, always productize those services. Customers tend to assume they’re getting a better deal when services are bundled together so by creating a bundle of similar services into a product, you can mask the price increase of some of the components. 

Service companies that already operate under this pricing model can raise prices by disassembling each component of a service package and then reassembling as multiple packages with additional features – basically creating a base package and premium options. For example, if your business offers a 48-hour turnaround, then introduce premium pricing for a 24-hour turnaround. 

The key to raising prices is to show that the customer is getting a higher level of service with the higher prices. While some may still focus on the bottom line, most will weigh the value their receiving against the overall price, making the increase a moot point.

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