Revenue Growth is Greater Than Price Increases

Higher prices affirm customers’ beliefs in value and attract even more buyers. This approach works for any business, of any size, in any industry.

A November 2, 2011 Barron’s article reports that Kraft Foods’ third quarter net revenues grew 11.5% in part due to a 7% price increase.

That means Kraft’s revenues grew a whopping 64% more than the price increase. For many business leaders this seems impossible. After all, conventional wisdom says buyers tend to find alternatives when prices go up, right? In reality customers have greater confidence in a product or service when its price reflects the value they’ll receive.

What does this mean for you? That you too can enjoy the results Kraft experienced. Here are the keys:

  • A reputation for quality.
  • Knowing who values that quality.
  • Pricing that reflects high value.

Let’s continue with the Kraft example to see how these apply.

Reputation

Kraft has a reputation for quality that’s spanned more than a century. The good news is you don’t have to be around that long to develop a reputation for quality. But consistent delivery of quality, however you and your customers define it, is essential to having revenues that grow faster than your price increases.

Knowing Your Customer

Kraft knows its customers have discerning tastes and are willing to pay a premium to get that taste. Their customers also value consistency in the product. In addition, their customers have an intuitive sense Kraft has their best interests at heart - that Kraft wouldn’t take risks in the manufacturing of their products that might cause the consumer problems.

Pricing

Kraft’s premium pricing adds further assurance of the quality, consistency and concern for their customers. Higher prices affirm customers’ beliefs and attract even more buyers to Kraft’s products. That’s how Kraft can enjoy 11.5% revenue growth with a 7% price increase.

As you can see, there’s nothing magical about what Kraft has done. This approach works for any business, of any size, in any industry. It’s up to you to employ these keys so you too can enjoy a similar level of success.

Dale Furtwengler is the author of the internationally acclaimed book, Pricing for Profit. His company, Furtwengler & Associates, Inc., helps companies get higher prices regardless of what their competitors or the economy are doing. For more pricing/branding/marketing/sales tips visit his website, PricingForProfitBook.com