Applying a ๐ณ๐น๐ฎ๐, ๐ฎ๐ฐ๐ฟ๐ผ๐๐-๐๐ต๐ฒ-๐ฏ๐ผ๐ฎ๐ฟ๐ฑ price increase to all your customers is like using a ๐๐น๐ฒ๐ฑ๐ด๐ฒ๐ต๐ฎ๐บ๐บ๐ฒ๐ฟ ๐๐ผ ๐ฐ๐ฟ๐ฎ๐ฐ๐ธ ๐ฎ ๐ป๐๐ – except in this case, your customer is the nut, and your price hike is the sledgehammer.
With UK inflation rising higher than expected (๐ป๐ผ๐ ๐ฎ๐ ๐ฏ% ๐ฎ๐ป๐ฑ ๐น๐ถ๐ธ๐ฒ๐น๐ ๐๐ผ ๐๐๐ฎ๐ ๐๐ต๐ฒ๐ฟ๐ฒ ๐ณ๐ผ๐ฟ ๐ฎ ๐๐ต๐ถ๐น๐ฒ) and other cost pressures (e.g. tax increases) kicking in, many business leaders are starting to panic. They feel they have ๐ป๐ผ ๐ฐ๐ต๐ผ๐ถ๐ฐ๐ฒ ๐ฏ๐๐ ๐๐ผ ๐ฟ๐ฎ๐ถ๐๐ฒ ๐ฝ๐ฟ๐ถ๐ฐ๐ฒ๐ ๐ฎ๐ด๐ฎ๐ถ๐ป.
And what do most businesses do?
๐ง๐ต๐ฒ๐ ๐ด๐ผ ๐ณ๐ผ๐ฟ ๐๐ต๐ฒ ๐๐ถ๐บ๐ฝ๐น๐ฒ๐๐ ๐๐ผ๐น๐๐๐ถ๐ผ๐ป: ๐ฎ ๐ณ๐น๐ฎ๐ ๐ฝ๐ฒ๐ฟ๐ฐ๐ฒ๐ป๐๐ฎ๐ด๐ฒ ๐ถ๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ ๐ฎ๐ฐ๐ฟ๐ผ๐๐ ๐ฎ๐น๐น ๐ฐ๐๐๐๐ผ๐บ๐ฒ๐ฟ๐.
Why?
โช๏ธ Because itโs ๐ฒ๐ฎ๐๐ – just apply the same percentage to everyone and call it a day.
โช๏ธBecause itโs ๐๐ต๐ฎ๐ ๐ฒ๐๐ฒ๐ฟ๐๐ผ๐ป๐ฒ ๐ฒ๐น๐๐ฒ ๐ฑ๐ผ๐ฒ๐ – no one stops to ask, “๐๐ด ๐ต๐ฉ๐ฆ๐ณ๐ฆ ๐ข ๐ฃ๐ฆ๐ต๐ต๐ฆ๐ณ ๐ธ๐ข๐บ?”
But this approach is flawed.
๐ง๐ต๐ฒ ๐ฃ๐ฟ๐ผ๐ฏ๐น๐ฒ๐บ ๐๐ถ๐๐ต ๐๐น๐ฎ๐ป๐ธ๐ฒ๐ ๐ฃ๐ฟ๐ถ๐ฐ๐ฒ ๐๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ๐:
A company I spoke with recently planned to apply an ๐ด% ๐ฝ๐ฟ๐ถ๐ฐ๐ฒ ๐ถ๐ป๐ฐ๐ฟ๐ฒ๐ฎ๐๐ฒ across all their annual plans in April.
Why 8%?
Because their desk research showed that similar businesses were increasing prices by ๐ณ-๐ญ๐ฌ%, so 8% “felt about right.”
And that was it. End of discussion.
โ ๐ก๐ผ ๐ฎ๐ป๐ฎ๐น๐๐๐ถ๐ of how this would impact revenue and profit.
โ ๐ก๐ผ ๐ฎ๐๐๐ฒ๐๐๐บ๐ฒ๐ป๐ of what it might do to customer acquisition or retention.
โ ๐ก๐ผ ๐๐ฒ๐ด๐บ๐ฒ๐ป๐๐ฎ๐๐ถ๐ผ๐ป – just a blanket increase for every customer, regardless of size, industry, or usage.
๐ก๐ผ๐ ๐๐น๐น ๐๐๐๐๐ผ๐บ๐ฒ๐ฟ๐ ๐ช๐ถ๐น๐น ๐ฅ๐ฒ๐ฎ๐ฐ๐ ๐๐ต๐ฒ ๐ฆ๐ฎ๐บ๐ฒ ๐ช๐ฎ๐:
Letโs say you have two customers:
โ ๐๐๐๐๐ผ๐บ๐ฒ๐ฟ ๐ ๐ฝ๐ฎ๐๐ ยฃ๐ฑ๐ฌ/๐บ๐ผ๐ป๐๐ต – An 8% increase adds ยฃ4/month. Probably not a big deal.
๐จ ๐๐๐๐๐ผ๐บ๐ฒ๐ฟ ๐ ๐ฝ๐ฎ๐๐ ยฃ๐ฑ,๐ฌ๐ฌ๐ฌ/๐บ๐ผ๐ป๐๐ต – An 8% increase adds ยฃ400/month. Now thatโs a material jump in their budget, and they might start reconsidering their options.
Same percentage increase. ๐ฉ๐ฒ๐ฟ๐ ๐ฑ๐ถ๐ณ๐ณ๐ฒ๐ฟ๐ฒ๐ป๐ ๐ถ๐บ๐ฝ๐ฎ๐ฐ๐.
The reality is ๐ป๐ผ๐ ๐ฎ๐น๐น ๐ฐ๐๐๐๐ผ๐บ๐ฒ๐ฟ๐ ๐ต๐ฎ๐๐ฒ ๐๐ต๐ฒ ๐๐ฎ๐บ๐ฒ ๐๐ถ๐น๐น๐ถ๐ป๐ด๐ป๐ฒ๐๐ ๐๐ผ ๐ฝ๐ฎ๐ or the same ability to absorb price increases. Yet, the blanket approach treats them all the same.
Donโt use a sledgehammer to crack a nut. Use a scalpel and target your price changes with surgical precision instead!