If your average sale is going up while your total number of customers is going down, you’re seeing the same pattern showing up across the economy right now. The businesses that get hurt by it are the ones who notice the customer count dropping and keep their prices exactly where they were.
It isn’t a fluke, and it isn’t only happening to you. Hollywood just put a very clean example on the table, and I walked through it on Businessing with Pat Miller.
What’s happening to customer counts and prices right now?
Two things are moving at the same time, and they pull in opposite directions. Prices are going up because owners have to raise them to cover the rising cost of goods and keep up with inflation. That’s not a growth story. Nobody invented a new business and started selling brand-new stuff. Owners raised prices to stay even, which pushes the average ticket north.
At the same time, the number of people buying is going down. So revenue can look flat or even healthy while the actual number of humans handing you money is shrinking. If you’re only watching the top-line number, you can miss this entirely until it’s a problem. You have to look at both numbers side by side, and you have to look at them more than once a year.
What did the summer box office prove about pricing?
This was one of the best summers the movie business has had in years, and a lot fewer people went to the movies. Both of those are true at once. Studios sold far fewer tickets than they did before the pandemic, and they still brought in a record pile of money. The answer isn’t a mystery. The average movie ticket costs a lot more than it did a few years ago.
Hollywood ran the experiment for you and published the results. Fewer customers paying more can still be a record year. Fewer customers paying the same is just a bad year with extra steps. That’s the whole lesson, and the difference between those two outcomes is a decision you make on purpose. If you’re watching your customer count drift down and hoping volume comes back, and it doesn’t come back and your prices haven’t moved, you end up with less revenue and higher expenses at the same time. That’s the squeeze.
How do I know if my prices are too low?
Start with the math instead of the feeling. Pull your average sale from twelve months ago and compare it to today. Then do the same with your customer count. If the ticket is flat and the count is down, you have a pricing problem you haven’t addressed yet.
Then look at your costs over that same period. If what you pay for materials, labor, software, and insurance went up and your prices didn’t, you already took a pay cut and just didn’t process it as one. The gap is usually bigger than you expect, because price increases feel dramatic and cost increases arrive one invoice at a time.
What should I do about it?
Raise your prices. Not all of them, not all at once, and not by a number you pulled out of the air. Pick one thing you sell, ideally something you’re great at and that people buy because of you rather than because of your price, and raise it. Then watch what happens.
Almost nobody leaves over a fair increase on good work, and the owners who never test it are the ones who assume everyone will. If a customer does leave over it, you just learned something about that relationship that was going to cost you eventually anyway. You’ll learn more about your market in thirty days from that single move than from another quarter of thinking about it.
Questions owners ask
Won’t I lose customers if I raise prices?
You might lose a few, and they’re usually the ones consuming the most of your time for the least money. Test it on one product before you decide what the whole market will do.
How much should I raise prices?
Enough to cover what your costs actually did, at minimum. If you haven’t raised prices in two years and your costs went up, holding steady isn’t cautious. It’s a loss you already took.
What if my competitors are cheaper?
Then you’re in a race you don’t want to win. Competing on price against somebody willing to go lower is a strategy with one ending. Compete on the transformation the customer gets instead.
Should I tell customers why prices went up?
A short, plain explanation lands better than silence, and better than an apology. State the new price and the date it starts. Don’t overexplain it.
What if my customer count is going up, not down?
Then you’re the exception and that’s great. Check your margins anyway, because rising volume at flat prices with rising costs is the same squeeze wearing a nicer suit.
Here’s the homework. Pick one product or service and raise the price this week. Just the one. The customers who stay will tell you what your work is worth, and the ones who leave were going to cost you eventually anyway. Watch the full episode for the whole conversation.