What to do when your competitors raise their prices
When your competitors raise their prices you have two response options; raise your prices, or maintain your current prices.
In this post we’ll look at situations where you can justify raising your prices in response to a competitor’s rise.
Your costs have risen
If there have been industry wide rises in the cost of raw materials, services or product then it makes sense to raise your prices to maintain profit margins. It will be relatively acceptable customers for you to raise your prices if they see your competitors have done so.
If you have more demand than you can reasonably supply then it is advantageous to dampen demand by increasing your prices.
Customer price sensitivity
Some markets are very price sensitive, others less so. Consider how price sensitive your customers are. If raising prices will have minimal effect on demand then it makes sense to follow the price rise and maximise your profit margins.
If you have a premium or luxury brand
If you have positioned yourself at the upper end of the market customers will expect to pay a premium for your service, raise your prices to ensure you maintain your premium positioning – you may choose to apply ‘added value’ to your product or service at the same time to justify the price rise.
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