5 Things to Consider When Raising Prices
Netflix will be very interesting to follow in the months to come as we learn what happens with drastic price hikes. Blockbuster took out the local movie rental guys with lower prices, Netflix took out Blockbuster by changing the game and lowering prices, and now Redbox is trying to do it again with kiosks and iPhone downloads. Netflix has 22.8 million customers in the United States, but Redbox is growing like a weed—it currently has 27,000 kiosks, an established iPhone application download strategy with over 1 million downloads already, and recently rented its billionth movie.
While I don’t pretend to be a movie expert since it’s been 25 years since I stepped foot in a movie theater, this dynamic is going to be interesting to watch from a pricing viewpoint. Whether printing or renting movies, pricing strategies change, and you need to be prepared. Call me weird for not appreciating movies, but I think everyone else is weird for not fishing for hours on end. My wife and friends just don’t get it!
Five things to consider when raising prices.
1) Have a roll-out strategy that gives customers options. Analyze the worst case scenario and prepare for it.
It appears that Netflix knows it will lose customers with its most recent price change. The printer mentioned earlier underestimated the impact of a quiet price increase. Setup some pricing models, look at each larger customer individually, and decide if you will lose the business. Decide and don’t look back, but also watch what happens in the market, take a pulse maybe with shorter surveys after jobs go out to understand customers’ impression of the experience, watch your win/loss ratio on bids, and have an adjustment plan ready if needed.
2) Go overboard preparing and managing the communications strategy with your most profitable, loyal and largest-revenue customers.
Let’s look at each of these three scenarios separately: