It's Okay To Raise Your Prices, Here's How to do it

If you got this email from a friend, I would greatly appreciate a follow on the weekly email memo. Every Friday I write my thoughts as a founder in the DTC space, sharing bits and pieces of things I learn and think will help you.

It’s been 3 years since I’ve been back to Toronto to visit my mom and I finally made it back today. This morning I went to a small cafe for breakfast when I noticed that their price has not changed at all since I’ve left.

Honestly, I’m shocked and impressed that they’ve been able to sustain throughout these years without raising their prices – ingredients have gone up, freight has gone up, labor has gone up, yet they kept prices the same. It’s a small cafe filled with customers that they’ve served for the last 40 years, ran by a group of older folks that I’m going to assume may be afraid of changes – even when it’s at a cost of their profitability.

So it inspired me to write today’s memo: it’s okay to raise your prices.

I’ve been operating eCommerce brands for almost 9 years now, and have my supply-chain and logistics company Saucehaus for the last 4. Through my clients, I’ve seen prices on raw materials, labor costs, assembly costs, and freight costs raise in rates never seen before. I’ll try not to sound like a broken record because it’s obvious – inflation is here, and we have to adapt or risk dying.

I get it. We’re all afraid of the backlash of raising prices. The reality is that as a business owner, you have to put your business’ interest first, and if it means upsetting a few people to save the jobs in your company, so be it.

There are a number of ways we can raise prices and ruffle as little feather as possible, so here are a few ways to do that in your brand.

Price adjustment should always be proactive and not reactive. This means you should be preparing for this well ahead of time instead of just switching it overnight because you felt like it. Think through how your costs have changed overtime and how much you need to increase the price to maintain the same margins as before. You don’t always need to match what you had before, and instead, add a little more for cushion. Either way, let your customers know ahead of time, such as having the new price take effect on the first of the quarter or the first of the year. This would encourage those who are price sensitive to stock up before the price change.

Consumers know that things are getting more expensive, they see it in their everyday lives and they’re adapting to the changes. They might not always know the macro economic conditions that affect a business’s cost, and oftentimes welcome the change if you can explain it well enough. For our lash brand doe, we increased our price from $12.50 to $14.50 a pair, and made multiple pieces of content explaining why we had to do so. We made a Tiktok and a blog post, both receiving an overwhelming positive response and our conversion rate actually went up for a short period afterwards because of this. People appreciated that we held onto our price for as long as we could before making this change, and this transparency made them more confident to buy from us.

Going off of our lash price adjustment, the way we increased our price was to introduce a new generation of lashes called the 2.0. The 1.0 remained $12.50 while the 2.0 now priced at $14.50. We rationalized the price increase by improving the lash hair and lash band on the product, making it even more lightweight than before while actually decreasing the actual cost of the product. The takeaway here is to optimize your product to with improvements, which creates an opportunity to manufacture it at a lower cost and for you to justify the new higher price.

The reason why one brand can charge more than the next brand for virtually the same exact product is because of its brand equity. The first brand that is higher priced may be able to command a higher price tag because they have better visuals, compelling copy, and a website that instills confidence. Without changing your product, you can increase the price of the product by elevating the marketing approach, associating it with a different lifestyle, and tying it all together with a whole new site experience.

In this approach, you’re still increasing the price of the individual unit, but now you’re adding a few bundle options that when discounted is close to what you were charging before. This approach encourages people to spend more on each order if they want to get the same price as before on the individual products.

Let’s say you don’t want to increase the price across the board because you want to be cautious, you can just increase the prices on a select few special variants when it makes sense. For example, if you’re selling a blender bottle with the typical solid color options, you can sell the camo design ones for a few dollar extra just because it stands out from the rest. The cost may not be much different for you, but for consumers that seek to stand out, it’s an attractive option.

Price anchoring refers to the strategy pricing strategy that plays on buyers’ inherent tendency to rely heavily on a piece of initial information to guide subsequent decisions. Let’s say you usually sell a 10 pack of razor for $100 but want to raise the price to $120. You can create some additional ‘bundles’ such as a 5 pack for $70 and a 3 pack for $45. This would make the 10 pack look like a great deal even though it’s $20 more than it used to be.

I wish I had this memo much earlier in my career because I was deathly afraid of making changes even when my business was taking a hit financially. I’m here to say: it’s okay to raise your prices and protect your business.

Hope everyone enjoy the rest of their Friday evening and have an awesome weekend! See you next week :)

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