04/20/2022

Why raising your prices can cause you to have raving customers

The competition will hate you when you do this

Customers are King. And the best companies know it, which is why they put so much effort into making their customer's experience as smooth and enjoyable as possible!

The easier it is for a customer to do business with you the more they are likely to spend and the more they will tell others about the experience.

You may be asking what the heck does this have to do with raising prices and pissing off the competition?

In short, it has everything to do with creating a great customer experience.

A little back story will help frame this up. Recently my wife and I went out to eat and we have noticed that some of the restaurants in our area are now charging an extra fee when you pay with a card. As business owners for well over 20 years, this seemed like a big mistake to us. It went against the whole concept of making it easy for customers to do business with them.

Not only was this off-putting to us as customers but could end up being very expensive for the businesses.

A study done by Dunn and Bradstreet found that people spend 12%-18% more when using credit cards instead of cash.

Why work so hard to get your customers in the door and do everything in your power to give them the best experience possible only to have it tarnished by an extra line item on the bill?

The answer is complex, but it comes down to a business owner being frustrated and not seeing the bigger picture.

You see, when people use cash they are very aware of how much money they are spending. They can physically see it leaving their possession.

However, when using a credit card, people don't feel the same "pain of purchase" and therefore tend to spend more.

In fact, studies have shown that when people use credit cards they are more likely to make riskier purchases and are less likely to comparison shop.

Going out to eat is a luxury. If a restaurant causes pain for the client especially right at the end of their experience they are likely to think twice before doing business with that establishment again.

So, by charging an extra fee for credit card usage you are effectively saying to your customers "we would prefer if you paid cash because it will save us money, even though it is not convenient for you"

This sends a very clear message to your customers that you care more about your bottom line than their experience.

And, if you're thinking that people won't notice or care about this extra fee, you would be wrong.

In today's world of social media and online reviews, people are more aware than ever of how businesses treat their customers.

If you want to stay ahead of the competition, you need to be focused on creating the best customer experience possible.

And, that starts with making it easy and convenient for them to do business with you.

By charging an extra fee for credit card usage, you are doing the exact opposite.

So what is a business owner to do?

The answer is simple. Raise your prices and build the credit card processing fee into your pricing.

By doing this you can turn an expense that hurts the bottom line into something that boosts the bottom line.

Here is an example:

Try raising your prices 5%. This can be done a couple of ways. A flat across the board 5% or you may choose to do it selectively on just your best selling items. 

Why 5%

5% is not easily perceived by most consumers and it offsets the fees charged by most credit card processors.

***

This is where it starts to get cool.

By raising your prices by just 5%, most of your customers will not notice and you will turn something that drags on the bottom line into something that helps the bottom line. All while at the same time giving your customers a great experience.

Exploit this to grow your business and make your completion hate you.

It's a simple fact, people love getting a great deal. If you market that you do not charge an extra card processing fee you will have a big edge over your competition. This is especially true if you are in an industry or area where it is common for other businesses to charge card processing fees.

Want to know a little secret?

The biggest and best are already doing this. 

We reached out to a couple of the most successful restructures in our area and when asked about charging an extra fee they said they just build it into the price.

Here is what Andy Roiniotis the owner of multiple very successful restaurants in the Rockford, IL area and co-founder of the hottest craft vodka brand Rockin Vodka had to say about this.

"I ran a survey on this and the majority of the customers would rather see the cost built into the menu items instead of an additional fee. The customer is always right lol"

This concept works for many industries, not just restaurants. 

The marketing lesson here is to wrap the fees into the product which will make your clients love you (or at least not hate you lol). If you are in a space where a lot of competitors don't build the fees into the products use this to your advantage by marketing that you don't charge any extra fees.