Why is it that Netflix can announce a slight price increase and the majority of people shrug it away but if the price of a loaf of bread goes up, the masses are ready to riot in the streets? It may have to do with value and perceived value. One thing is for sure, you always risk losing customer’s business and trust with even a slight price increase.
One of the most challenging tasks companies face on a regular basis is to hold their old customers when they increase the price of their products. With the increase in market conditions, price inflation and world economic factors, there is a requirement to also enhance the price of products and services.
However, this is not easy.
There are ample risks involved. Because there are chances that the moment prices are increased, existing consumers will lose their loyalty for the product and look for cheaper alternatives. As a result, the product provider can lose a lot of revenue.
Explanation for Price Hike
If the scenario of the market is such that there is no option but to increase price, then one requires increasing it. For example there can be a situation where the product supplier has increased its prices roughly 10% in the last year. Then you cannot avoid but increase the prices at least by 5%. An explanation can be given to the client base that the product price has been partially increased and not completely and this can help retain your customers.
"It Could Always Be Worse" Comparison
In situations where your competitors have all increased their prices it is important to disclose this information to the user base. A comparison in between the price increase of competitive product and your product will help them understand the actual potential of your product.
Sometimes, your customers will do this for you. Netflix has announced price increases several times during the past 5 years. Many took to social media to voice their opinions. Although there was no lack of complaints, many customers compared the price of Netflix to the price of cable television which is much more expensive.
Another way for a comparison approach to work is to allow some customers to keep using your product or service for the same price, but remove a feature or option. To use Netflix again, in 2016 they announced a price increase from $7.99 to $9.99. Customers who wanted to continue to enjoy Netflix as is will now pay $9.99. However, if some customers did not want to pay that price, they could still have full access to the site for $7.99 but would not be able to view in HD or view in multiple screens.
This type of comparison will allow customers to see the difference in service and they can then decide if it is worth paying the extra 2 bucks to watch House of Cards in HD. By the way, it is.
However, it is possible to increase prices without adding an entirely new service to your arsenal. Instead, deliver an enhanced result.
The best way you can retain old users and increase price is to add something to the product to increase its worth. A sweet deal as it is commonly termed in the business world, this makes sure your consumers remain bonded to your product even if a price change has occurred.
It’s very important that the value that you are adding is worth it to the customer. Adding a feature that isn’t valuable to the customer will just backfire on you. Rule of thumb is to not charge for cosmetic changes. If you produce an all natural line of iced teas, enhancing label designs, for example, is not a good reason to charge customers. But adding pomegranate or acai juice to your tea may be a good reason for customers to pay more.
This is going to be tougher for those of you in the service industry. Adding a service means more time you must spend. However, it is possible to increase prices without adding an entirely new service to your arsenal. Instead, deliver an enhanced result. If you own a digital marketing company, instead of branching out to offline marketing, deliver more exposure for your customers through different social media networks and blogs.
Another trick is to transform quantity. Here one is recommended to offer a big quantity product at lesser price point. The customers will obviously look out for products with high quantity. For example, a customer usually purchases a 4 bottle beverage at a particular price.
Now, since the overall price has been enhanced you compel the customer to buy a 6 pack sealed beverage set at a good price. Hence, cost is reduced but profit is maintained.
A premium or a freemium product is that one which involves price repositioning. Here, customers are recommended to buy an alternative product which costs more but is so attractive that the customers are not lost. For a premium high priced product, a free offer also helps keeping customers bonded with the brand. Hence, the premium product helped you increase your price but the freemium addition kept the attraction quotient intact.
Dropbox is a good example of how to offer a freemium. They allow you to use the software to backup and share files. I first used Dropbox when the photographer who took my wedding photos wanted us to review the photos. I loved it. But Dropbox’s free version allows you to only use 2GB of space. That amount of space can be used pretty quickly. The premium version is $9.99 which is affordable and valuable for those who use a lot of photos and video.
Choose the Perfect Time
Timing is the most crucial aspect in every business. If the price of a product is increased at around a time when the year is coming to an end then it is taken as a natural step. As a result, customers are not lost. People do expect new things in a New Year and hence even if a product’s price is made higher at this time, people accept it naturally. It is because they expect a new value being added to the existing product due to which its price has been increased.
The basic idea is not to rush at all when it comes to price inflation. Prices of products or services must be enhanced gradually and not all of a sudden. A small and exponential growth in price point will not cause adverse effect to your product. It will not lose old customers rapidly. A sudden price hike can cause negative effect to your entire user base at one go thus creating huge amount of loss of money, customer and reputation.
The best way you can retain old users and increase price is to add something to the product to increase its worth.
The Free Trial Approach
The last way to do this task is to undergo a trial and error method. But here’s a warning; no matter how much you plan, there still remains a risk of losing a few customers on the eve of a price hike. Hence, it doesn’t do much good to worry about it. If the requirement of the price enhancement is such that it is absolutely mandatory then you must moderately increase it.
A little shift in price will not affect the business adversely. To conclude, you must understand market conditions and the activities of your competitors in order to take strategic decisions about price inflation. Feedback from your own customers can also help you gain priceless insight about your product and its price point.
This article was first published on StartUp Mindset.
Women of the Middle East have made significant strides in the past decade in a number of sectors, but huge gaps remain within the labor market, especially in leadership roles.
A huge number of institutions have researched and quantified trends of and obstacles to the full utilization of females in the marketplace. Gabriela Ramos, is the Chief-of-Staff to The Organization for Economic Co-operation and Development (OECD), an alliance of thirty-six governments seeking to improve economic growth and world trade. The OECD reports that increasing participation in the women's labor force could easily result in a $12 trillion jump in the global GDP by the year 2025.
To realize the possibilities, attention needs to be directed toward the most significantly underutilized resource: the women of MENA—the Middle East and North African countries. Educating the men of MENA on the importance of women working and holding leadership roles will improve the economies of those nations and lead to both national and global rewards, such as dissolving cultural stereotypes.
The OECD reports that increasing participation in the women's labor force could easily result in a $12 trillion jump in the global GDP by the year 2025.
In order to put this issue in perspective, the MENA region has the second highest unemployment rate in the world. According to the World Bank, more women than men go to universities, but for many in this region the journey ends with a degree. After graduating, women tend to stay at home due to social and cultural pressures. In 2017, the OECD estimated that unemployment among women is costing some $575 billion annually.
Forbes and Arabian Business have each published lists of the 100 most powerful Arab businesswomen, yet most female entrepreneurs in the Middle East run family businesses. When it comes to managerial positions, the MENA region ranks last with only 13 percent women among the total number of CEOs according to the Swiss-based International Labor Organization (ILO.org publication "Women Business Management – Gaining Momentum in the Middle East and Africa.")
The lopsided tendency that keeps women in family business—remaining tethered to the home even if they are prepared and capable of moving "into the world"—is noted in a report prepared by OECD. The survey provides factual support for the intuitive concern of cultural and political imbalance impeding the progression of women into the workplace who are otherwise fully capable. The nations of Algeria, Tunisia, Morocco, Libya, Jordan and Egypt all prohibit gender discrimination and legislate equal pay for men and women, but the progressive-sounding checklist of their rights fails to impact on "hiring, wages or women's labor force participation." In fact, the report continues, "Women in the six countries receive inferior wages for equal work… and in the private sector women rarely hold management positions or sit on the boards of companies."
This is more than a feminist mantra; MENA's males must learn that they, too, will benefit from accelerating the entry of women into the workforce on all levels. Some projections of value lost because women are unable to work; or conversely the amount of potential revenue are significant.
Elissa Freiha, founder of Womena, the leading empowerment platform in the Middle East, emphasizes the financial benefit of having women in high positions when communicating with men's groups. From a business perspective it has been proven through the market Index provider MSCI.com that companies with more women on their boards deliver 36% better equity than those lacking board diversity.
She challenges companies with the knowledge that, "From a business level, you can have a potential of 63% by incorporating the female perspective on the executive team and the boards of companies."
Freiha agrees that educating MENA's men will turn the tide. "It is difficult to argue culturally that a woman can disconnect herself from the household and community." Her own father, a United Arab Emirates native of Lebanese descent, preferred she get a job in the government, but after one month she quit and went on to create Womena. The fact that this win-lose situation was supported by an open-minded father, further propelled Freiha to start her own business.
"From a business level, you can have a potential of 63% by incorporating the female perspective on the executive team and the boards of companies." - Elissa Frei
While not all men share the open-mindedness of Freiha's dad, a striking number of MENA's women have convincingly demonstrated that the talent pool is skilled, capable and all-around impressive. One such woman is the prominent Sheikha Lubna bint Khalid bin Sultan Al-Qasimi, who is currently serving as a cabinet minister in the United Arab Emirates and previously headed a successful IT strategy company.
Al-Qasimi exemplifies the potential for MENA women in leadership, but how can one example become a cultural norm? Marcello Bonatto, who runs Re: Coded, a program that teaches young people in Turkey, Iraq and Yemen to become technology leaders, believes that multigenerational education is the key. He believes in the importance of educating the parent along with their offspring, "particularly when it comes to women." Bonatto notes the number of conflict-affected youth who have succeeded through his program—a boot camp training in technology.
The United Nations Women alongside Promundo—a Brazil-based NGO that promotes gender-equality and non-violence—sponsored a study titled, "International Men and Gender Equality Survey of the Middle East and North Africa in 2017."
This study surveyed ten thousand men and women between the ages of 18 and 59 across both rural and urban areas in Egypt, Lebanon, Morocco and the Palestinian Authority. It reports that, "Men expected to control their wives' personal freedoms from what they wear to when the couple has sex." Additionally, a mere one-tenth to one-third of men reported having recently carried out a more conventionally "female task" in their home.
Although the MENA region is steeped in historical tribal culture, the current conflict of gender roles is at a crucial turning point. Masculine power structures still play a huge role in these countries, and despite this obstacle, women are on the rise. But without the support of their nations' men this will continue to be an uphill battle. And if change won't come from the culture, maybe it can come from money. By educating MENA's men about these issues, the estimated $27 trillion that women could bring to their economies might not be a dream. Women have been empowering themselves for years, but it's time for MENA's men to empower its women.