Yeah, what he said…

I thought this article in the New York Times Small Business section might be interesting to a few of you. I know it was to me. Below is most of the article, for the article in its entirety go here.

Not a Bad Time for Small Businesses to Raise Price

By PAUL B. BROWN

Published: November 10, 2008

Some small-business experts are offering advice that may sound counterintuitive in this slowing economy. Now, they argue, may be the perfect time to increase your marketing budget — and even your prices.

ZIG WHEN THEY ZAG “If your competition is busy nursing their recessionary wounds, then you should become aggressive in marketing yourself and your products,” argues Morebusiness.com, a Web site that describes itself as a “one-stop resource Web site for entrepreneurs.”

By increasing spending when your competitors are cutting back on theirs, you will have a chance to increase market share and be much better positioned to be profitable when the downturn ends.

HIGHER PRICES On her blog, smallbusinessboomers.com, Jean Murray, a small-business consultant, discusses the arguments on whether it is a good time to raise prices.

“There are two schools of thought on this one: One, it’s a recession. No one is buying. So in order to get new customers and keep current customers happy, you lower your prices.”

On the other hand, she writes, despite the talk that deflation — a period of declining prices — may occur sometime in the near future, most business are facing rising costs, especially if they purchase commodities. That, she says, gives them “every right to pass along these increases” to their customers.

Given recessionary pressure on one hand, and rising operating expenses on the other, Ms. Murray says she chooses raising prices. “If people see the value in your product or service, they will keep buying.”

MORE THAN HIGHER PRICES For small businesses worried that a price increase will drive away customers, Entrepreneur magazine says there is a way to gain the benefits of a price increase without actually charging more.

“Prices don’t exist in a vacuum. Like the earth under your feet, a price is supported by the value the customer perceives in the product or service to which the price is attached. Thinking about price and value in this way makes it clear that this is at least a two-dimensional problem. That is, you can change the pricing and leave the value alone, or you can change the value and leave the pricing alone.”

Food companies are the perfect example of this. They often leave the price unchanged, but give you less. Coffee used to be sold in 16-ounce containers but is now sold in 13-ounce cans at the price companies used to charge for a full pound.

A similar business analogy may be to keep your prices the same, but have lower-priced people — senior associates, instead of partners — do the work.

HEDGE YOUR BETS If you are going to raise your prices, set them higher than you have to, suggests Karen E. Klein, writing on businessweek.com.

That way, if your customers balk, you can reduce the price increase a bit and still end up with the increase you need.

Here’s an example — ours — of how that might work.

Suppose you want to raise prices 8 percent. You would announce a price increase of 10 percent, knowing that if customers object, you could offer them “special terms” of some sort that reduces the actual increase to the 8 percent increase you want.

And, of course, if no one objected, you would keep the full 10 percent.