Raise your price and  keep your customers?

A successful price increase can raise profut
considerably. If the company's profiit margain
is 3% of sales, a 1% increase in price can result 
in a 33% increase in profit, if sales volume is unaffected.              
Raising your price annually is one way to increase
margins, assuming you also keep your costs constant.
It can also be more effective than  cutting costs.
Cutting cost may require downsizing or restructuring,
which takes time and planning. Raising prices in these
competitive markets can be risky and chaotic. Let us
look at some of the ways that you can raise your price
effectively.

1. Its better to add a 2% - 5% increase than a huge
 10% or 15%. A small amount will likely to be more
receptive. Large increase will make your customer
look elsewhere for new bids.

2. Consider your customers planning schedule. Give
adequate notice of a likely increase so as not to
disrupt their cost structure. Give them enough time
so that they can incorporate the increase in their
costing. yes I know what you are thinking. Do I 
give them enough warning for them to get other bids?
The answer is some might. If your relationship with
your customer is solid, you wont lose them. The key
is timely announcement.

3. If your product is one that requires a lot of after 
sale consultation. You can charge a price for extra
service. For complex products some companies will
give you free consultation for up to three months.
After that you are required to pay a fee. You can
charge a flat fee for a 800 number or a cost for
900 number.

4. Throw in some service along with the product and
then charge a higher price. Some car dealers include
road side assistant for break down. Some soft ware
companies offer free upgrades on certain software.

5. An alternative to #4 is to upgrade your product 
or service and then charge a higher price. Of course
you need to inform current users of the upgrade. Stress
the benefits derived for trading up.

Good luck and I hope your price increase will result
in higher profits.