As several SME owners have discovered firsthand, the difference between value and price is enormous, and that raising their prices has actually increased their sales volumes.
While it comes in stark contrast to the traditional race to the bottom on price, Lachy Rowston and Raph Freedman of the CrossFit Creature gyms in Sydney told My Business that “you’d be surprised what happens to your business when you just put the price up”.
“We had a gym and we’re a CrossFit affiliate, and then there was another affiliate down the road, so it seems like quite a similar type of situation. We were X dollars a week, and then they went to X dollars minus one a week and they were a little bit cheaper,” said Mr Freedman.
“We thought maybe we should go a little bit cheaper than them, and you realise pretty quickly that it’s a pretty silly game that you’re playing. It’s not going to end well for either of you.”
As such, they decided to go the other way and increased their prices, supported by a changed offering which added more value to customers and hence warranted the higher price tag.
“Any time you step your game up with price, naturally everything elevates, and price is the best way to do that,” Mr Rowston added.
“If you want know what it’s like to coach a client, just say ‘Hey, I cost $200 an hour now’, and see what kind of coaching experience you’d deliver for that $200. You might have an extra shower in that day, you may have 40 minutes of prep before the session and [be really well presented].
“Whereas [if] you’re like, ‘Oh it’s $20 an hour to train with me’, you’re probably going to be late, you haven’t showered, you’re not going to do a good job. You’d be surprised what happens to your business when you just say, ‘Okay, we’re going to charge more’, and you just put the price up.”
It is not the first time a business has enjoyed success by raising, rather than cutting, their prices.
“I’m not a cheap experience. An initial appointment with me is $300 for a haircut,” Jules Peacocke, owner of Lily Jackson Hair & Makeup, told My Business.
“My clients are booked 12 months in advance.
“By the time someone has got to me and they’re willing to spend that much, they’re often traumatised by the experiences that they have had. They are really looking for serious solutions.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.