Would You Increase Prices After British Gas’ Backlash?
British Gas has announced that they will be increasing their prices by an average of 9.2% by the end of November. This has infuriated the nation and indeed even the government, with David Cameron urging customers to switch Energy suppliers.
Customers are outraged- particularly as the cost of living is rising much faster than incomes. Energy prices have been a very touchy subject in the UK in the last decade, particularly as prices have continued to increase above and beyond inflation.
It is very likely- and understandably so- that other industries may look at this and think twice about introducing a price increase to their customers. After all, is it really worth it?
The truth of the matter is that there are an inordinate amount of companies out there who are underselling their products, but are frightened of ‘rocking the boat’ with their existing customer base. So they are continuing to fight on, even though they know that they are underselling.
The point here is that in a lot of cases, price rises are completely justified, withjustification being the operative word. No one likes a price increase, but if you can clearly justify why you’re having to increase your prices; most customers won’t jump ship or give you a hard time.
If you just write to your customers informing them without any justification as to why you’re doing it, other than a blatant ‘because we can’ or effectively ‘because we want to make more profit’ then you’re very likely to upset the apple cart.
So… First and foremost. Can you justify it? Secondly, how should you introduce a price increase to your loyal customers? This essentially breaks down into a 4-part strategy for effective price increasing;
You must prepare for every eventuality i.e. what are the customers likely to say, think and have a problem with. Have strong counters to justify your reasoning behind these.
2 Flag it
Prepare your customers before you actually announce that you’re increasing your prices. This is a very important step, with the trick here being to decrease the expectations of the customer in the short term to make the impending change sound more prominent than what it actually will be.
This will help you immensely when it comes to you making your price increase announcements as your customer will breathe a sigh of relief when it is the far cry from what they had been anticipating. This step is something British Gas omitted to do (or didn’t do very well). Most people thought that prices would be held due to the much colder previous winter which increased British Gas’ turnover, fuelling the outrage amongst the nation when announcements were made.
This is a good time to remind the customer of the value of your product and the benefitto the customer. Indeed this is your opportunity to highlight some possible positive changes or new ventures that will benefit the customer in the near future.
British Gas actually did try and justify their price increase- they said it was down to the cost of 1) buying energy 2) delivering gas and electricity to homes 3) the governments social and environmentally plans. However arguable, this still went down like a lead balloon due to the fact that they fell short on the earlier stages.
The underlining message here is that you SHOULD NOT be discouraged to increase your prices if you believe you’re underselling your product. As long as you eliminate the element of ‘surprise’ and ensure you are fully prepared, there is no reason why introducing price increases can’t help make your business even more successful.