Of course, with the skyrocketing cost of living for consumers, no company wants to be in the news for raising prices. Even if they cannot avoid it, because they also incur more costs for raw materials, energy and wages.
How do you handle it as a company? We have listed the most used methods for you.
Pass the cost on to your customer
Pass the bill to your customers to preserve their own profit margin. The food giant Unilever, for example, Or competitor Kraft Heinz.
In the last quarter, Unilever had an increase of EUR 5 billion. And it was all thanks to you raise prices of shampoo, detergents and ice cream. Because less was sold. The British group had to say that it had to, to ensure that it would not suffer from the increased commodity prices.
And the company has more than succeeded in that, given the higher profit.
Same story with Heinz Kraft. The American ketchup giant sold 2.3 percent less soup, sprinkles and porridge. Still, profits rose. How? Because the company raised prices to compensate for the increased costs. And it worked miraculously well: profits increased with more than 1,100 per cent.
Refer to someone else
If the big companies do it, their customers have no choice but to do it. Supermarkets, but also cafes and restaurants: they also increase prices.
Some are honest about it, for example by reporting the price increases on the menu. With still other companies, you will only find out if you keep a close eye on your expenses, for example for groceries.
Make it a luxury product
You can also approach it very differently, by giving your product a nice luxury jacket. With a smart advertising campaign, you can suddenly sell your own product for much more money. After all, consumers are quite willing to pay extra for luxury.
Beer brewers Heineken and AB Inbev, for example, are very good at this. It’s all about the phenomenon premiumisation or prestige pricingresponse to the consumer’s desire to buy something from a well-known brand.
Heineken launched Heineken Silver especially for this purpose, notified the company in the figures for the first quarter. And it bears fruit. The profit increased by as much as 40 percent.
For every euro that Heineken received, the company made 16 cents in profit. Not so surprising: most of the growth in the past six months owes the brewer price increases. The company raised prices by about 15 percent, thanks in part to premiumisation.
Raise prices only in a specific category
At Lego, they are trying to sell the price increase as a kind of Robin Hood. The company is in the process of raising prices due to increased costs. In his own words, the Danish toy manufacturer has absorbed that blow for as long as possible, but it is no longer possible.
And so Lego sees no other option than to charge more money for its products. The following applies: The more expensive the set, the greater the price increase. In this way, the company tries to ‘minimize the impact’, says a spokesman.
The prices of the stone boxes for the smallest fans remain the same, on most other products the prices increase by less than 10 percent. For the larger, more complicated sets, the price increase will be the greatest.
Use cheaper raw materials
An old trick: save yourself. For example, by using cheaper raw materials. A familiar example from the past is a thinner layer of chocolate around a Magnum ice cream. Maker Unilever experimented with this oncebut also quickly reversed the experiment.
Less content, same price
There are other solutions that are a little less noticeable. Such as putting less content in the well-known package of pancake mix or cruesli and selling it for the same amount as before. This phenomenon is called shrink inflation.
In the video below, reporter Gert-Jan Verstegen explains in great detail how it works:
Asking for money for something that was free
Car manufacturers are also never afraid to earn some extra pocket money in a creative way. The latest trick: charging money for a fairly standard (luxury) feature in cars.
The car manufacturer BMW charges 19 euros per month (!) for a subscription to heated seats. A nice warm steering wheel? An additional 11 euros per month. And then there are lots of extra features that you can only use for a monthly fee. And BMW is not alone in doing this, we discovered.
Pretend you’re giving a discount
With the introduction of the iPad in 2010, the late Steve Jobs, founder and CEO of the tech company, cleverly foresaw a possible point of criticism: the introductory price.
According to Jobs, it would have been estimated by analysts at $999. But surprise, surprise: Apple managed to keep the price at $499. And for that amount, a lot of people can buy one, Jobs argued. You can watch his commercial speech below:
Interesting, all those tactics. But is it really possible?
Yes, in general it is allowed. Companies are free to set the prices for their products or services themselves. It is different if you have already made an agreement on the price. An entrepreneur may then no longer increase this, unless it appears from the general conditions.
Then it is allowed within three months after you have booked an appointment. And as a customer, you also have the right to cancel the transaction. And then we will have to swallow higher prices for a while, explains Roland Koopman in the video below.