Should Companies Openly Communicate Price Increases Directly to Consumers?

Editor’s Corner Volume 6, Number 12a: Should Companies Openly Communicate Price Increases Directly to Consumers?

One thing you haven’t seen a lot on Cigar Coop are articles on cigar companies raising prices. Truth be told, much of the reason for this is simply because as a member of the media, this information in the majority of cases is never sent to us. In many cases it is sent to retailers, and media members will pick up the communication from the manufacturer or brand owner who will then report the price increase. It’s a practice I never paid too much attention to – until a recent question came up on the October 14th edition of the Smooth Draws Radio Show – where I am a co-host.

Taking media out of the equation, the communication to the retailer is often the mechanism the price increase is communicated. In most cases, the consumer is not told directly. We posed the following question on that practice to our audience and got some results which said a lot.

“A company increases the price of a cigar, but chooses to tell the retailer and not announce the increase to the general consumer.”

One hundred percent of our audience voted “In the Trash” – meaning they disagreed with the practice. This was from a survey sample of 31 people. While not a huge sample set, the numbers were unanimous and made a clear statement – cigar consumers don’t like this practice. After these results were tabulated, I then started to peel the onion and looked at why there was such a reaction.

Not a Unique Practice to the Cigar Industry

First up, communicating a price increase to a retailer only is not a cigar-specific practice. It is a general retail practice seen in other industries. The logic is that the retailer is actually the direct consumer to the manufacturer, and the cigar enthusiast is the direct consumer of the retailer. After this was communicated, I was contacted by several brand people who told me as part of being an authorized retailer for the product, they feel it is the retailer’s job to communicate the price increase.

Why the Cigar Industry is Different

But as we often hear – the cigar industry is a different animal. In a way, the model the cigar industry has makes it a little harder for the cigar industry to swallow. We see that there are many very small ventures – sometimes family run, sometimes a one-man show. Many have used a combination of social media and events to establish a direct conduit between the people running the company/brand. It’s not limited to just small companies. We have seen it with bigger companies – such as General Cigar which has worked hard to establish similar connections to consumers. I talked to several consumers on this and one general conclusion I reached is that many consider brand owners and manufacturers to be friends. They are excited when a new product hits the market, and are grateful when the communication is made. Yet, when it comes to the price increase, an effort is not made to leverage the strong connection established with the consumer.

Others manufacturers and brand owners stated “they don’t want to call attention to it”

There are those manufactures which have been very open and forthright – communicating the price increase to the customers. Recent examples include Perdomo Cigars, RoMa Craft Tobac and Southern Draw Cigars. RoMa Craft does a great job of communicating to its customers via the social media channels.  Robert Holt and Southern Draw Cigars does the same – and he even went as far as issuing a press release earlier this year. While Perdomo has for the most part absorbed SCHIP price increases for many years, when a price increase was needed, they have communicated it.

These are companies that clearly “put some attention on it”. These are companies that have had some great success. Perdomo has been a long time successful company while RoMa Craft Tobacco and Southern Draw Cigars clearly are rising stars.

Some stated they have no way of communicating the practice to consumers

There is no easy way to say this – that statement is near laughable. In today’s electronic age, it’s as simple as communicating it through your email list, social media, and press releases to media sites. In many cases, I understand the communication can’t be the same one sent to the retailer because of wholesale pricing – although I think many consumers have an idea of how that works.

One retailer told me he was unhappy with this practice by Cigar Manufacturers

This retailer told me that when a manufacturer or brand owner doesn’t communicate the price increase to the customer, it almost leaves the retailer as the person who has to deliver the bad news. This retailer told me he feels it needs to be done in unison – namely telling both the customer and the retailer.

What about Price Decreases?

I’ve heard some argument stating that when it comes to price decreases, companies are a little more likely to communicate them to consumers. To some extent, we have seen this. We have seen companies like Drew Estate, La Palina, and Black Label Trading Company communicate this via press release. However, some companies have been very careful about how this communicated – especially if retailers are sitting on stock with product they have acquired at the higher price. While I understand this is a tricky scenario, I’m still inclined to say companies should also be open when communicating the price decreases to both retailers and consumers. In the end, just like price increase, having a solid communication plan for a price decrease can only be a win-win for all.

Final Thoughts

There was once a series of commercials by Syms Department Stores (a chain primarily based in the New York area) that used the slogan “an educated consumer is our best customer”.  That slogan has always stuck with me in regards to the cigar industry. I feel for the most part when a cigar company has taken the time to educate a consumer on their products, it is only a positive. Some companies do this better than others. When it comes to pricing, I consider it a part of the education package. Cigar consumers are some of the most educated ones. Many understand the challenges the industry faces – and the ones who don’t will take the time to learn. These challenges often have led to the price increases. In the social media age, many companies have done a good job of educating consumers through building these direct conduits. I do think the one piece of the puzzle that would complete the education piece is establishing better communications in terms of price increases – and will strengthen the industry as a whole. The fact the audience on Smooth Draws answered unanimously on this topic speaks volumes, and it’s something the industry should take at heart and build it into a positive.

We will be debating these thoughts as well on Episode 31 of the Prime Time Show on 11/21 at 10 pm Eastern Time.

Read More: Editor’s Corner Volume 6, Number 12a: Should Companies Openly Communicate Price Increases Directly to Consumers?
Source: Cigar Coop

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