WSJ Raise Prices
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WSJ Raise Prices (by Bill [KY]) Nov 21, 2021 8:12 AM
       WSJ Raise Prices (by NE [PA]) Nov 21, 2021 8:17 AM
       WSJ Raise Prices (by Dave [MO]) Nov 21, 2021 9:05 AM
       WSJ Raise Prices (by 6x6 [TN]) Nov 21, 2021 9:42 AM
       WSJ Raise Prices (by BRAD 20,000 [IN]) Nov 21, 2021 5:21 PM
       WSJ Raise Prices (by BRAD 20,000 [IN]) Nov 22, 2021 12:28 AM
       WSJ Raise Prices (by BRAD 20,000 [IN]) Nov 22, 2021 12:29 AM

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WSJ Raise Prices (by Bill [KY]) Posted on: Nov 21, 2021 8:12 AM
Message:

The landlord application fee, which I havenít yet deployed, gets a shout out. As a group, letís discuss how we can creatively raise prices to remain profitable. Article pasted below.

WSJ:

The demand curve imposes its tyranny on every business. Raise prices and sales will begin to falter. Cut prices and customers will flock to you. Itís usually either higher sales or higher profit.

The holy grail of pricing strategy is in finding ways to circumvent this seemingly ironclad economic law, to raise prices without losing sales. That becomes even more crucial at times like now, when input costs are increasing quickly, and raising prices is necessary just to keep the business running.

But we live in a time when customers have sharp eyes and loud voices. When a company raises prices directly, some vigilant customer is bound to notice and complain on social media, no matter how small the increase or valid the reason. A few complaints could then spiral into a firestorm of outrage, upturning even the most carefully orchestrated price increase.

The solution for many companies is to raise prices, but covertly. Companies hope that by making price increases hard to evaluate, they can then escape notice and avoid a customer backlash.

Here are common ways companies raise prices covertly.

1. Unbundling services, lowering product quality and devaluing reward programs

My favorite pricing aphorism is, ďRaise prices but keep them the same.Ē It sounds like a Zen koan, and it holds the key to a successful price increase. Consider this telling statistic from a recent Wall Street Journal article on airline prices: The average domestic airline ticket price is about the same today as 25 years ago, $260, versus $284 in 1996. And thatís before adjusting for inflation. How is it possible that the airline industry hasnít increased ticket prices in over two decades?

It isnít, really. Most of us are paying a lot more to fly today, thanks to a combination of three covert price increases. First, airlines have unbundled services so that fliers pay extra for checking luggage, boarding early, selecting a seat, having a meal and so on. The charges for these services donít show up on the ticket price, but they are substantial. Second, the airplane seatís quality, as measured by its pitch, width, seat material and heft, has declined considerably, meaning customers are getting far less value for the ticket price. And third, many airlines have steadily eroded the value of frequent-flier miles, increasing costs for todayís heavy fliers relative to those in 1996.

These practices are also common in other industries, whether itís resort fees in hotels, cheaper raw materials in garments and appliances, or more-stringent restaurant and credit-card rewards programs.

The average domestic airline ticket price is about the same as 25 years ago, but airlines have found several other ways to raise the cost of flying.

PHOTO: BILL SIKES/ASSOCIATED PRESS

2. Shrinkflation and the quantity surcharge

Most people are familiar with shrinkflationóthe common practice in the grocery industry of reducing weight, quantity or volume of a package while maintaining price. It works effectively as a covert price increase, because consumers are far more likely to notice price increases than equivalent weight or quantity decreases.

Less well known is a little psychological trick companies use with larger packages. Many shoppers assume that such packages with labels like ďParty SizeĒ or ďJumboĒ will be cheaper on a per-unit basis. This is often not the case. Brands routinely exploit this common consumer belief by marking up larger packages more, and earning a greater margin on them. Researchers call this a ďquantity surcharge.Ē

SHARE YOUR THOUGHTS

What various pricing strategies do you notice when shopping? Join the conversation below.

At the same time, in many categories like cola and cookies, smaller packages still often cost a lot more per unit than standard-size packages, just as consumers expect.

The critical insight is that every product in a brandís lineup has different markups and margins that arenít always intuitive to customers. To raise prices covertly, the brand or the grocery store sells more of the higher-margin items by increasing their availability and visibility in the store, or withdrawing popular lower-margin items from circulation for a period. The prices donít change, but customers pay more.

3. Disappearing deals and coupons

Incentives such as coupons, ďbuy one, get oneĒ offers and free shipping are common in many industries. Every promotion lowers the actual price paid by customers. So it makes sense that companies can routinely raise prices covertly by reducing the incentives they offer.

Even increasing the threshold for free shipping, from $49 to $99, is tantamount to a price increase. Customers might grumble when they realize their favorite deal is no longer available, but relatively few of them change their behavior in response.

4. The sunk costs of memberships

Consider the following comparison: Which one is cheaper, a 64-ounce container of mayonnaise at a warehouse club that costs $7.99, or a 48-ounce bottle of the same brand at a supermarket for $5.94?

Most people will guess the warehouse club because of its low-price image. If you do the math, the price per ounce is roughly the same. But if you consider that the warehouse club requires a separate mandatory membership fee, the customer is actually paying more per ounce at the warehouse club.

Still, even though they pay it, most warehouse customers almost always ignore the initial fee, even if itís recurring. They treat it as a sunk cost and fail to account for it in calculating the actual price they are paying for an item.

Known as two-part pricing, the membership fee camouflages the actual price paid by customersóand is behind the success of Costco, Amazon and likely your neighborhood gym. (A gymís initiation fee, a landlordís application or administrative fee, and an online ticket sellerís per-transaction processing fee all serve the same purpose.)

Most customers of warehouse clubs donít factor membership fees into the cost of their purchases.

PHOTO: JOE RAEDLE/GETTY IMAGES

5. From good to better and from better to best

Another way to raise prices covertly is to introduce new, higher-quality versions at higher prices. This is called ďgood-better-bestĒ pricing. Consumers like this approach because it gives them more choices. But its side effect is a stealthy price increase.

Many companies have used this method to benefit from higher consumer demand and earn higher prices during the pandemic. For example, Peloton lowered the price of its most popular basic spin bike by $350, or 16%, from $2,245 to $1,895. At the same time, it introduced a more expensive and profitable new bike for $2,495.

I believe that both moves effectively increased the average prices paid by Peloton customers, although the company wonít confirm thatís the case.

The smartest companies donít raise their prices with great fanfare, because direct price increases are often met with customer resistance. What they do instead is to employ nuanced pricing strategies to increase prices covertly, often keeping their regular or visible prices unchanged. Most customers donít notice, and some customers may even benefit by paying less. But in the end, the company enjoys higher sales and profit margins than before.

Dr. Dholakia is a professor of marketing at Rice University in Houston. Email him at reports@wsj.com.

--98.17.xx.xxx




WSJ Raise Prices (by NE [PA]) Posted on: Nov 21, 2021 8:17 AM
Message:

I did good-better-best pricing on the last place I rented out. Was previously rented for $900. I advertised it at $1400 and had a ton of showings. When the prospects came to view the unit, they were able to choose an upgrade to all stainless steel appliances for the $1400, add just a washer & dryer for $1300 or keep the appliances as they were and rent it for the $1200. The tenant chose the $1200. Appliances are old but sellable. Works for her and a double win for me. I donít have the expense of the appliance upgrade and I still raised rent $300/ month. --24.152.xxx.xx




WSJ Raise Prices (by Dave [MO]) Posted on: Nov 21, 2021 9:05 AM
Message:

I will send out annual rent increases of $15 to $25 dollars a door. Definitely not covert but makes a nice monthly income increase for the business. The small annual increase in rent is not enough for a resident to search for another rental and move. The key about annual increases is to also do repairs and maintenance in a quick and timely manner. --66.76.xxx.xx




WSJ Raise Prices (by 6x6 [TN]) Posted on: Nov 21, 2021 9:42 AM
Message:

This has been going on for quiet some time.

It always amazes me how people just buy something ( usually something they don't actually need ) and pay no attention to the price. This is one reason why prices are what they are today. People in this country just want what they want and don't care what the price is. Some might grumble for a minute but they buy it anyway.

There is a very easy solution to the problem, but you can't get enough people to do it. STOP BUYING!!! If the demand goes down, the price will go down. Too many people want it now and won't wait. They have credit cards, after all, which also increases there cost. Silly rabbits.

Psychology is an interesting subject.

Just thoughts from a self reliant, self efficient, saver.

--73.120.xx.xxx




WSJ Raise Prices (by BRAD 20,000 [IN]) Posted on: Nov 21, 2021 5:21 PM
Message:

Bill,

Just do it!

I had free apps for 40 years, hoping to get as many apps as possible and cross sell - "that home is rented but I have another you should look at".

Amazingly, in one freak month we got 89 applications. I said ENOUGH!

We charge $25 for 2 persons on one app. Cheap. This did not slow down the number of apps AT ALL!

We get 2 per day so 60 x $25 = $1500 cash in my pocket each month. (I cringe when I add up 40 years x $1500 = $60,000 LOST because of my timidity.)

Some local LLs charge $47 per person and use the commercial screeners.

I just that WSJ article this morning. Good stuff.

We have raised deposits.

RTO program means THEY do the maintenance. OR tell them you are giving them a discount to do the maint.

Encouraging animals - $150 Reg Fee plus $35/month.

We have not actively promoted washer/dryer but that would help.

MY big take away: as business persons we must be AHEAD of inflation. I had a store in the 80's. We had to price the items based on REPLACEMENT cost, NOT what we paid for it. If I sell a widget for $10 but the replacements will need to sell for $12 I won't have brought in enough money to buy the replacement stock.

LLs must increase rents NOW to accumulate the funds to cover the increases in taxes, ins, materials, labor...

Wisdom note to newbies: your local govt will also need more money so it's guaranteed your property taxes will go up.

BRAD

--73.102.xxx.xxx




WSJ Raise Prices (by BRAD 20,000 [IN]) Posted on: Nov 22, 2021 12:28 AM
Message:

More thoughts on services increasing their prices.

A local small water company changed. I must pay the former residentís unpaid bill to start MY service or the next resí service. So we keep it in our name and charge a flat rate large enough to cover the bill with a margin.

Small sewer util will now fix overdue bills by digging to the line and installing a locking valve on the sewer line. $1500 fine. Same.we add it to the rent at lease signing.

When I worked selling school equipment the company added a $4 service fee to every order. Brought them back into the black.

Daughter 20,000 lived in a 500 unit apt complex. They charged $4 per month the read each aptís water meter. Thatís $2000 added income per month for something they were already doing.

Amazon was just growing so they charged $1 per box to handle at the office.

Keeping track of and applying charges in the lease ($50 NSF, $5 per day late, $35 to serve late notice or court papers, high prices for cleaning and repairsÖ) Iím ready to increase lates to $50 the day itís late.

Weíre putting SimpliSafe systems in nicer homes as an amentity. Could charge.

70% of our folks sign up for PayDayRent weekly or bi-weekly. We bring in a 13th month of rent on each home.

BRAD

--73.102.xxx.xxx




WSJ Raise Prices (by BRAD 20,000 [IN]) Posted on: Nov 22, 2021 12:29 AM
Message:

More thoughts on services increasing their prices.

A local small water company changed. I must pay the former residentís unpaid bill to start MY service or the next resí service. So we keep it in our name and charge a flat rate large enough to cover the bill with a margin.

Small sewer util will now fix overdue bills by digging to the line and installing a locking valve on the sewer line. $1500 fine. Same.we add it to the rent at lease signing.

When I worked selling school equipment the company added a $4 service fee to every order. Brought them back into the black.

Daughter 20,000 lived in a 500 unit apt complex. They charged $4 per month the read each aptís water meter. Thatís $2000 added income per month for something they were already doing.

Amazon was just growing so they charged $1 per box to handle at the office.

Keeping track of and applying charges in the lease ($50 NSF, $5 per day late, $35 to serve late notice or court papers, high prices for cleaning and repairsÖ) Iím ready to increase lates to $50 the day itís late.

Weíre putting SimpliSafe systems in nicer homes as an amentity. Could charge.

70% of our folks sign up for PayDayRent weekly or bi-weekly. We bring in a 13th month of rent on each home.

BRAD

--73.102.xxx.xxx



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