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I think that one of the hardest things to do is to charge what we are worth. Very few people feel comfortable asking for a raise, even if they are doing excellent work that materially contributes to their employer. Likewise, many franchisees are afraid to charge increased prices for services or products that they provide. (Note: While it's usually a minimum price, some franchisors do dictate the prices to be charged for franchisees in certain instances. Check with your franchisor for your specific rules.)
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But why the fear? Most likely, we are afraid of losing something when we raise prices—customers, respect, even a job. However, the fear is nearly always unfounded, and it is an irrational part of a very rational executive decision. It seems counter-intuitive, but charging higher competitive prices will help your franchise succeed. So go ahead. Raise your prices.
You Will Attract and Keep Better Quality Customers
We all price shop to an extent, but those who only buy based on price are less concerned with quality. Value is a balance between price and quality. When we price too low, we send a message that we do not value what we sell. Being a low-price leader is not the mantra for highly successful businesses.
It is incorrect to assume that lower prices will attract more customers or keep the ones you have. Instead, those low-price customers do not seek value, and they will be difficult to please. The customers you want are those who truly believe that you get what you pay for – and they are willing to pay.
Customers Will Respect You
I can think of several situations when I chose the highest price of multiple estimates for things like home projects, air conditioning, or even child care. In every instance, the good referrals, the quality, and the provider all pointed to a high-quality service or product. I believed I was paying for an expert worthy of respect. And premium pricing added to that belief.
When a franchisee is clear and sure of their value, it changes the customer relationship for good. By being the higher-priced expert provider, you remain in control of how your customers view you and how they interact with your franchise—respectfully.
You Provide Better Service
A service franchisee whose prices are on the higher end can provide better service. Automotive repair franchisees will retain customers and foster loyalty when they foster fewer customers who pay higher prices. They provide more personal service and focus on care. Then, the customer will return because they experience top-notch service.
Profitability Goes Up
The obvious direct financial benefit to increased prices is improved revenue. Every penny of a price increase improves your financial prospects. The cost of getting your product or service into your customers’ hands remains the same, so the increase is an immediate bump for the franchise. When we fear a price increase, we lose focus on our goal of franchise success.
Remember that your service is strong, and your expertise is valuable. You are worth what customers pay, and they will appreciate what they receive in return. So, go ahead. Up your prices, and realize the benefits that price leadership brings to your franchise success.
Anne Daniells is a co-owner of Enterprising Solutions, a professional services firm specializing in corporate communication and financial improvement for businesses where she shares decades of corporate and entrepreneurial experience—including franchise ownership—in her writings on business culture. She has authored hundreds of articles for publications including AllBusiness.com, TweakYourBiz.com, and MSN.com. Reach out via her website for more on where corporate culture, communication, and human architecture collide.