Recently, I've been visiting the market, meeting many distributors, wholesalers, and retail outlets. Conversations quickly shift to how business is getting tougher, and continuous product price hikes are making the already bleak business even worse. From these visits, I've observed three basic situations: First, some brands haven't raised prices at all. Their channel pricing remains unchanged, but they keep threatening distributors that a price increase is imminent. Second, some price increases have failed. Consumer prices couldn't be raised, and after the increase, channel profits couldn't sustain the supply chain. Either they're holding on while losing market share, or they've had to roll back prices through channel policies. Third, some price increases have succeeded. The supply chain operates normally, and market share hasn't been lost. Today, let's discuss how brands should approach price increases. A price increase generally has three stages: pre-increase preparation, execution, and post-increase follow-up and monitoring.

Pre-Increase Preparation Sudden price increases or inadequate preparation are the main reasons for failure. 1. Market Research: Competitive Landscape In plain terms, you need to understand your competitive relationship with key rivals. FMCG has long entered an era of zero-sum growth, where sales gains for one come at the expense of another. If your product is in a tight race with competitors, with similar sales, be cautious about raising prices—otherwise, you're handing over market share. If your product leads significantly and has market clout, you have the inherent conditions for a price increase, and the focus should be on communicating with channel partners at all levels. If your product lags far behind, besides survival, consider how to effectively use the extra revenue beyond costs; a well-executed move could turn the tide and change the competitive landscape. 2. Brands Can Start Locally, Adapting to Local Conditions A price increase doesn't need to be nationwide simultaneously. China's market is vast, with significant differences in wealth and consumption habits. You can start in certain regions and then roll out nationally. What conditions make a region suitable for an early increase? First, competitive position: sales should far exceed the second-place competitor. Second, high per capita disposable income: wealthier regions are less sensitive to price increases. Third, established consumption habits: for example, with betel nut, many regions show little consumer resistance when packaging size increases slightly with a price hike. A reminder: after raising prices in some regions, strictly control cross-regional sales (parallel imports). Don't let discounted goods from other areas undermine your increase—you'd be shooting yourself in the foot. 3. Raise Prices by Category, Not All at Once Every brand has a product portfolio. When raising prices, choose the right products first: which ones are ready for an increase, and which should wait, using previous adjustments as a reference. There's a sequence. Also, avoid adjusting all prices simultaneously; allow a reasonable time gap. 4. Fully Warm Up Channel Customers Before the Increase Channel preparation isn't just a salesperson dropping by to inform. Most channel customers' first reaction to a price increase is: "This salesperson just wants me to stock up more." Indeed, such tactics have been overused, eroding trust between upstream and downstream. The announcement should be formal. I suggest using a stamped notice from the brand plus a stamped price adjustment letter from the distributor, presented together as a price increase notification. Have key regional customers sign to confirm. It's a bit more work, but it ensures effective communication. 5. Mobilize the Internal Team A price increase will temporarily affect sales and thus team income. Ensure the team doesn't work with negative emotions. Before implementation, align the team's understanding, boost morale, and consider using part of the increased profit for incentives, so everyone is motivated and in sync. Do the groundwork thoroughly; only then can the increase be pushed forward effectively.

Execution During the Increase 1. Decide on the Method: Overt or Covert? What is an overt increase? If a product was 30 yuan per unit and is now 32 yuan, with the product unchanged, that's an overt increase. This suits brands with strong brand power, product strength, and channel margins. An overt increase needs a justification: a. New Product: Use functional upgrades or product iterations as a reason to launch new products and justify a price increase. Examples: electric toothbrushes with more features, smartphones with higher specs, and new flavors of chips. b. New Packaging: "New bottle, old wine"—introduce aesthetically pleasing, well-designed packaging so consumers pay for beauty. Example: limited-edition packaging in cosmetics. c. Cross-Industry Collaboration: Create new value through cross-industry or co-branded products, making consumers pay for a new image (product and brand). Example: Heytea collaborating with Warrior canvas shoes. d. New Category: Change the product's classification to rationalize a price increase. For instance, a cup as a daily item might top out at 30 yuan, but as a piece of art, 3,000 yuan could be acceptable. Each category has its pricing ceiling. What is a covert increase? A product was 30 yuan per unit, and it's still 30 yuan, but the pack size drops from 24 bottles to 20, or the bottle size from 500ml to 400ml—price unchanged, quantity reduced. This suits brands with weaker brand power or those hesitant to adjust channel margins. Direct price increases always attract consumer attention. Compared to raising prices, reducing product weight draws far less attention. For example, with a bag of chips, Option A raises the price by 10%; Option B keeps the price but reduces the chips by 10%. The latter gets much less attention. We all know the secret: McDonald's Big Mac has barely increased in price over the years, but its size has shrunk. When Coca-Cola launched its "Nickname Bottle" campaign, the on-bottle copy drew huge attention. Many went to supermarkets to buy a bottle matching their identity, but few noticed the new packaging had shrunk from 600ml to 500ml. Coca-Cola not only used a covert reduction instead of a price hike but also employed a "feint to the east, attack to the west" tactic, successfully diverting attention from the reduced volume to the bottle's copy. In fact, almost no one noticed the slimming change that year. 2. Price Execution and Policy Alignment A price increase isn't simple arithmetic; it requires recalculating channel profits. Adjust from the top down in the supply chain, but implement from the bottom up: start with retail outlets, prioritizing paid channels like KA and CVS for retail price adjustments, then roll out to all outlets, then adjust wholesale or distributor purchase prices. Channel profits—for outlets and wholesalers—must be protected first. Consumers need time to accept the increase, which will inevitably squeeze middle-channel profits. Since middle channels have many brand choices and low loyalty, if profits fall short, they may switch to alternatives. Align policies: in the early stages, offer strong channel incentives. Ideally, raise the invoice price but provide free goods so the effective cost is similar or slightly higher than before, then gradually reduce the free goods. Channel partners also need time to adapt. 3. Increase Consumer Communication Activities Success ultimately depends on whether consumers accept the new price. So immediately after the increase, build goodwill with consumers. The best ways are communication and value-added promotions. Communication means reintroducing your product's features to counter the weakened brand and product appeal. Promotions must not include your own products, or the price increase message becomes meaningless.

Post-Increase Follow-Up and Monitoring Follow-Up with Key Accounts: This is crucial. Monitor their inventory and sales closely to prevent losing them due to the increase. Use display agreements, cumulative sales bonuses, extra rewards for larger orders, or other buy-and-give promotions to ensure reasonable profit margins, so they can lead and influence others. Channel Price Adaptability: Whether channel prices are sustainable often becomes clear only after some time. Higher prices lead to lower consumer demand. Demand is elastic; as prices rise, consumer behavior changes. But this change needs finer analysis: price changes affect both the ability to meet demand and the willingness to meet demand. These two fluctuations determine channel price adaptability. Strong adaptability means the increase succeeds; weak adaptability requires indirect adjustments.

Final Thoughts: With rising labor and raw material costs in recent years, especially under inflationary pressure, corporate profits are razor-thin, and businesses teeter on the edge of losses. Therefore, raising prices is an inevitable choice for companies to build strength for future development. Finally, three core principles for price increases:

  1. Consumers aren't interested in cheap products; they're interested in products that make them feel they're getting a bargain. The cheaper the product, the less consumers feel they're getting a deal.
  2. Channels and retail stores aren't interested in low-priced products; they're interested in products that generate more profit for them.
  3. A successful price increase policy should use the new pricing to let consumers "get a bargain" and let outlets make a profit. Only then can the increase succeed.