How's that make you feel?
What would happen if you doubled your prices today?
No warning to your faithful customers.
Your invoice just doubled.
This just happened to me.
I've been a member of the La Crema wine club for over a decade.
They even give me free shipping because I've been a member for so long.
I'm the first to say I like a good glass of wine now and then, but I'm not a huge wine drinker.
The reason I joined the wine club was because we received a "behind the scenes" tour with the winemaker at a private event years ago.
This is the only wine club I belong to because Ellen and I only drink wine when we have friends over, or on holidays.
When I first joined the La Crema wine club, we received two bottles of wine three times a year.
The bottles are around $40-60 each so this was a big splurge for us but it's really good wine.
A few years ago, they upgraded the program to three bottles of wine three times a year which was fine with us.
Our investment in the wine club was between $400 and $500 a year for nine bottles of good wine.
Like I said, it's out of our norm.
Yesterday I received an email letting me know my membership has been upgraded.
At first, I was excited until I read the fine print.
Most of the time I'm okay with memberships being upgraded because I usually receive more benefits with little or no increase in price.
This time my membership was increasing from three bottles to six bottles per shipment.
My investment in the wine club is now $800 to $900 a year, which is hard to justify for us.
For me to feel good about doubling the price of the wine club, I have to PERCEIVE I'm getting a better deal.
Here's what they're offering:
- Free shipping now comes with all memberships, but I already received free shipping so that's no added benefit to me.
- VIP access and discounts to new and exclusive wine club wines and promotions
- Complimentary concierge services for planning your visit to Sonoma County
- Invitations to wine club exclusive events happening at the La Crema Estate at Saralee’s Vineyard as well as discounted events at other wineries.
- Complimentary Estate Tasting flights for up to 4 people per visit
We live about 45 minutes from Sonoma Valley where the winery is located but we don't go wine tasting very often.
Seems like the only time we go wine tasting is when we have visitors from out of town.
These days you need reservations at all wineries and it's usually $40 to $150 a person for one tasting flight.
Gone are the days of free wine tasting or a nominal fee of $5.
We could justify our wine club upgrade if we took advantage of the complimentary Estate Tasting flights.
If we brought two friends with us, we'd save at least $400 on tasting fees which would justify some of the price increase.
Four trips to the tasting room would save us $640 justifying the wine club membership.
While I enjoy La Crema wine, I'm not sure if we'll continue being members of their wine club.
18 bottles a year is more than we'd drink, and we'd have to make four trips to the tasting room.
What would happen if you doubled your prices?
How many customers would you lose?
What additional benefits could you provide that would make your customers perceive they are getting a better deal?
There are plenty of ways to structure your pricing so for this example let's focus on increasing your current price.
Let's say you doubled your prices.
You lose 25% of your clients who aren't willing to pay your new price.
Before the price increase, you grossed $1,000,000 a year.
When you double your prices, your gross increases to $1,500,000 and you have fewer customers to serve.
What if you lost 50% of your customers?
Your gross revenue stays the same, but you have substantially fewer customers to serve.
You have more time to serve your clients so they will be happier, and they'll be active customers for a longer period of time.
It would be risky to double your prices, but it may be worth exploring.
I would rather focus my attention on 50 customers at a time for the same revenue that I'm currently earning serving 100 customers.
Remember, to keep your customers, they must perceive they're getting a better deal at the new price point.