The Wall Street Journal reported that prices for goods had fallen by 1.8% from a year ago while prices for services rose by 2.2%. It’s believed that a poor global market is causing goods producers to feel downward price pressures.
As wages pick up, providers of services may find they are able to raise prices due to less pressure from overseas competitors as compared to goods producers.
Consumer spending on services counts for 2/3 of all spending. If you are a service provider and have not raised prices in the past year you should at least seriouslyconsider doing so.
But How? One strategy is to send out an annual notice to clients in January stating that you have evaluated prices and costs and have decided to raise prices by x%, or will keep them as is. Even if you choose to keep prices where they are, clients will get used to the annual consideration of such a move. Therefore, they are less likely to defect if you do since this is a normal part of your business process. Of course, you should always be seeking to improve the service you deliver so price rises are not met with incredulity.
What Happens After That? Most of my clients who have raised prices (single digit percentages) have experienced minor customer defection. You may have more power than you think if you are providing a top-notch service. If you are a goods producer, it may be more difficult to raise prices unless you are highly differentiated and what you produce has growing demand.