Double your prices.
That will work for a couple of weeks.
Guess what happens next?
The value proposition will change.
Customers will feel that they are getting ripped off, unless you give them double the value they used to receive.
Customers will make choices that won't include you.
Long term sales will go down.
Business will suffer.
Ultimately, you will close your doors.
Business people know they can't raise prices that dramatically unless they dramatically change the value offering. Yet one national business is trying to get away with it.
The price of stamps have gone up by more than 50% in one year.
Canada Post is a service that is heavily subsidized by the Federal government. For years, it was a necessity. If we needed to send out invoices, cheques, letters, or Christmas cards, we had to use snail mail. It took a long time to get from our house to its destination, but we accepted it because there weren't any affordable options.
In 2008, one of the Canada Post unions went on strike. The mail stopped. But for the first time in the history of postage, business did not.
Businesses that were still sending invoices by snail mail, learned that email was quicker and less expensive. Businesses that only accepted cheques at payments, started sharing bank account information for e-transfers.
We got through it because we found another way to get our stuff to its destination.
And the postal union realizing this fact negotiated back to work terms before the rest of world realized that the post office is a dinosaur, just like flip phones, and cathode ray TV's.
To make an e-transfer costs about $1.00, less if you have a bank bundle.
To buy stamp to send a cheque by mail costs $1.13. There's still the cost of the cheque, the bank fee, and the enveloppe, that could easily be another dollar.
Why would anyone ever want to pay twice as much for a service that takes 2000 times longer to deliver, with a small probability of it getting lost on its voyage?
Since the strike of 2008, I've been wondering when the country stops using Canada Post altogether.
When I order on Amazon, UPS takes care of me.
When I need to pay a bill, Paypal or e-transfers have my back.
When I need to invoice a client, Freshbooks or simple e-mail is a more effective option.
When I need to send a Christmas card... What am I thinking? I don't send Christmas cards, and neither do most people my age and younger.
Postal service is dinosaur waiting for the asteroid to end it all.
Is it worth a $1.13 to send a letter? I guess it depends on the contents of the package.
Remarkably, Canada Post has realized profits for 16 years leading up to 2011. But has had two disappointing years since then with substantial losses.
Costs go up. Gas costs, employee costs, insurance, property taxes. They all contribute to the ever increasing cost of doing business for Canada Post.
If your insurance doubled, without you having an accident, wouldn't you look for another supplier?
If your mortgage doubled, wouldn't you check out other banks?
If your cell phone and cable bill doubled, I'm sure you'd look around.
Canada Post is somewhat of a monopoly. Clients have no other choices to send out a small letter, so they can charge more and people will have accept it.
And that's where the thinking is flawed.
The choices are wide and vast for Canada Post clients.
The easiest way to increase revenues is to raise prices.
The easiest way to decrease long term profits is to raise prices.
Here's why: An substantial increase in price is a shock. It will decrease usage. A decrease in customers will erode the revenue stream in the long run.
Any business who loses customers year over year is doomed.
The purpose of a business is to create and keep a customer.
It's not to make money. Money is the result. Money comes from a job well done.
If you're losing customers and you're not finding new ones to replace them, your business is finished. You just don't know it yet.
Sorry Canada Post friends, to quote Jim Morrison, "This is the end".
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