If you have to raise prices, do it wisely

Recently Citigroup raised the credit card rate on some of its customers from 7 percent to 17 percent with no reason other than they needed the money! The timing of doing this while getting billions of taxpayer money for a bail out is insane!

I understand the need to increase rates and fees. That is part of business and the evolution of the economy, but do it with some intelligence! "Because I need the money" is not a valid reason to raise rates! Customers in today's market are savvy comparison shoppers and they are smarter than customers of any time. They are also the least loyal of customers in history; therefore, jump shifts in pricing, rates or negative returns will have the exact opposite response executives desire for their organizations.

Be open

We life in fishbowl transparency times and good or bad news travels fast. A gas station decides to gouge customers during a shortage, and word gets out fast. Someone is selling flat screen monitors for a ridiculously low price – word spreads faster than electricity moves. When businesses need to adjust rates and prices, do it openly and gradually. Announce in advance what is coming. Customers no longer tolerate "it was in the fine print" as justification, seeing it instead as trickery. Organizations will be perceived as underhanded and distrustful.

Rates do go up

Everyone understands that things get more expensive over time because they understand their paychecks should go up over time. In times like we are living in currently, where paychecks are frozen or disappearing, increases in prices and rates are going to be viewed with disdain and the company viewed as taking advantage of "the little guy."

If you are raising your rates subtly (your cheeseburger is going to be 4 cents more than is used to be) then there is probably no need to announce to the world you are charging more, but if you are jumping your credit card interest rate by more than 100 percent, you best have let customers know this is coming and go into graphic detail as to why they were targeted for that increase.

Add value

If you foresee the need for a significant rate increase, add value to what you are offering. For example, let's say you are charging more for an oil change because oil disposal regulations have changed and your rates are going from $19.95 to $29.95. Sure, let the customers know the reason for the increase, but add in an extra value free of charge, a service that would be appreciated by the customer but adds minimal or no cost to you. Clean and RainX their windshield for them. It’s an extra touch, adds minimal cost (sell the product in case the car owners wants to purchase that product), and the customer feels you did something more.

It's easy to figure how to raise rates and prices. If your focus is on the customer, you will make the right choice. If your focus is purely for your own bottom line, you are going to make a wrong choice. Besides, once word gets out what you've done, you will do damage to your reputation and your bottom line as well. Make the right decision when making the necessary changes to rates and prices.