I know that this is going to be a touchy subject for many of you. With the current economy, we are hearing a bunch of noise about consumers not being able to handle it anymore. They have reached their limits and don't have any money left to spend. You are hearing this and in many cases anticipating a substantial drop in exams and purchases.
I am just not seeing this when I am and out and about. The lines at Starbucks for overpriced coffee are still around the building where I live. There are still wait times at higher-end restaurants. Maybe there has been a little drop in entertainment like movie theaters, but I am convinced this has more to do with the quality of movies being released than the economy. The economy sure did not slow down sales for Top Gun: Maverick! People are still willing to pay for good entertainment.
With that being said, consumers are hearing the same stuff you are hearing and while not truly suffering in many cases, they are asking for a deal and looking for sale items. Much of what we do is driven by what we hear and not by what we are actually experiencing.
Does this mean you shouldn't raise your pricing? Absolutely not!
Many of you have held the line with your pricing since 2020 hoping to retain your base. Almost everyone did the same thing. Well, depending on whom you listen to, we are past Covid. The great resignation has turned into a reset of income, giving many their highest pay level increases ever. Those who are working are doing better. Sure their costs have gone up but not as high as yours.
5 Reasons To Raise Your Pricing in 2023
- It costs more to have good employees in 2023, and you are paying your staff more than ever before.
- Almost every wholesale channel has taken an increase and your products are costing you more than ever.
- Just like your customers, your living costs, from insurance rates to groceries, have gone up substantially. Your taxes, electricity, and rent have probably increased as well.
- Many of you have pricing structures based on your costs from 2019 or before. Look around, it is not 2019 anymore.
All of the marketing you do won't matter if you can't be profitable. You simply cannot make up for non-profitable sales with high volume. You will only lose more money while overworking yourself and your staff.
This will lead to you incurring more debt and finally an out-of-business sign on your door.
Your focus needs to be on value! If you are giving your patients an exceptional experience and high-quality goods, you should be able to charge more than your competition and remain a good value. Value is a perception. Not everyone will find value in what you have to offer but many will. If you cannot make money on a patient why would you even want their business? Let them go and cost your competition money, a true win-win.
Now that I have persuaded you that the time is right to raise your pricing, let's look at how to do so effectively.
I would guess that there is a chance your pricing was not even correct in 2019. Your markup was not based upon your costs and was simply done out of reaction to your competition. When it comes to pricing you must keep your competition in mind, but that can't be your only focus. You should have a value progressive lens in your offering that allows you to be both competitive and profitable. This should be your save-a-sale product, not the product you lead with.
4 Key Steps in Raising Your Pricing
- Make sure you bring your employees along for the ride. You will need their buy-in to make this work to its fullest potential. Be open with them about your costs going up. If you have given them increases in their pay over the years (I sure hope you have), remind them of this. Make sure they understand that they are part of the team and if your profits go up their lives will get better.
- Start by creating a category report. What is your top-selling category? Medical? Contact Lenses? Frames? Eyeglass lenses? Focus your increases on your top 2 categories.
- Next, dig deeper into an item report. Here is where you can get really creative. You might find that one line of frames is 40% of your frame sales. People want them and are willing to pay for them, so this would be a great place to start with a small increase. It is okay to have a loss leader or two but make sure you are
making bank on the items and products that people are seeking (keep in mind, your customers are the same people who spend $8 on a cup of coffee or tea every day). Getting an additional $10 on a hot selling frame will make big difference in your margins at the end of the year. - Set a margin goal. You need to know what you want to make in profits and adjust your price points based on usage to get you there. Small increases like $5 on a value frame or $10 on AR will most likely go unnoticed by your customer. Keep some key price points low, but have 3 or 4-tier offerings. Too often patients will ask for a discount and you give in. When you have to give a discount you should be dropping a tier making sure your margins remain strong. Not selling at cost or taking a loss.
Your pricing has gone up. While you might have a frame on your board that cost you $50, it will now cost you $60. Change the price based on your new costs. Don't be afraid to make some money. Fear of profits has driven many retailers out of business.
In closing, make sure to monitor your sales. Take time to go over your P&L sheets with your staff monthly. Give them some ownership into winning, and in most cases, they will.
