This is a Quora question I was asked:
What is the best way to raise prices of products selling to major retailers? For a consumer home products brand selling to major retailers online (Home Depot Walmart, Costco, and so on), what is the best way to raise prices? We are 3 years old and this is the first price increase. Ideas and strategies to get 3-5% without increasing our MAP would be great!
My answer is below.
Here are strategies for raising prices:
- Research your competitors and justify the increase if they are also raising prices.
- Come up with a different model/newer version with additional value that justifies a price increase, but the value add is not as expensive, so you your cost of goods sold does not increase on a liner basis.
- Give your retailers an extended period of time where they can purchase product at the old, lower price, so they get extra margin for the trouble.
- Run more sales off of the new price for a period of time to help ease consumers into it, then back them off to your normal promotion schedule.
- Offer discounts on volume purchases by the consumer, so while your anchor price goes up on a single unit, you still offer discounts on volume.
A sneaky way for vendors to increase prices is to reduce the item size or count (if multiple items in a package), and lower the price, but not on a liner basis as the size reduction, thereby in effect, raising the price. This is not a good approach, in my opinion, because consumers will take notice. It use to work, but I think now just tarnishes your brand image.
I post what I see and do in consumer products. But I am just one person with my own perspective. I want your opinion and observations from your point of view. Please comment below so I and others can learn. Thank you!