How to Introduce a Price Increase Without Losing Your Customers
⏱ Reading Time: 8 minutes
Price increases are part and parcel of operating a successful business.
You may need to increase your prices to adjust to rising inflation. Or to offer an improved product with better specifications, features, and value.
Either way, raising your prices is crucial for preserving your profit margins. Stagnant pricing, on the other hand, can put your entire business at risk.
Most customers will accept that you need to increase your prices from time to time. Providing that you communicate your motivations in a clear manner, they’ll understand.
Hiking your prices with no warning is a good way to alienate or even lose customers. Nobody wants to pay more money for a product or service without understanding why.
This is why price increases have as much to do with communication as with the prices themselves!
Here are 10 ways to introduce a price increase without driving away customers.
1. Communicate Honestly
This is a cardinal rule of business.
There’s just no point in trying to hide your price increases. Explain to your customers that you’re raising your prices. Tell them that the increase allows you to move with the market and grow your level of expertise.
You can still offer a bulk discount or other special offers. This allows your customers to save more by supporting your business.
Being transparent will increase your customers’ trust in your brand. Your honest approach will reduce their frustration at the announcement of higher prices.
2. Detail Your Costs
In the interest of transparency, explain to customers exactly why you’re increasing your prices. You should also tell them how you will use the extra money they’ll be paying your way.
If your operational expenses have increased, tell your customers that that is the reason for your price increase.
If you’ll be spending more on manufacturing your products, say so. Highlight how these products’ additional features or improved materials will benefit them.
3. Be Confident In Your Decision
The worth of your products and services will increase as your business develops and grows.
Explain to your customers how your price increase will enable your company to better serve them and meet their needs.
There is no need to apologize for a price increase.
If you have proven your reliability and value, your customers will remain loyal.
A few customers may attempt to negotiate if you come across as tentative about an increase. Be firm and confident. You know your product is worth the price.
4. Over-Deliver Before Delivering the News
Over-delivering on value shows that the amount of value you’re willing to provide exceeds the prices you charge. Your customers will know that they’ll be getting an excellent deal. Even at a higher rate.
Experts like Porch co-founder and CEO Matt Ehrlichman encourage over-delivering. Set out to impress your customers for at least 100 days. Once you reach this point, let them know about a planned price hike.
Picture 1. Over-delivering
5. Add or Enhance Features
Are you selling a useful tool or service? If so, soften the blow of a price increase by adding value with new and improved features.
Your loyal customers will understand. It’s natural that your service’s price will change as it improves and its feature set expands. Adding new features also gives you a compelling reason to revise your deal terms.
6. Pack in Added Value
Added value is the key to making your offer as appealing as possible.
You need to improve and enhance your products on an ongoing basis if you plan on increasing your prices. After all, few customers will pay more for the same product or service they paid less for before!
Justify your price increase by introducing interesting extra features. As an alternative, add value in any way you can.
7. Offer a Lower Priced Option
Offering customers different options at varying prices is a great way to encourage them to focus on value. The decision presented will have them thinking about the value your products set. Doing this shifts their mindset away from the price increase.
This is a helpful approach if your lower plans are less expensive than your current price.
Picture 2. Paldesk pricing models
8. Offer Updates and Alternatives
Keep your customers updated about your plans. Let them know about potential price increases before they come into effect.
Give them the chance to act before your prices go up. Afford them the opportunity to purchase a higher-tier plan or value-added product.
You’ll get a much-appreciated revenue boost from these early upgrades and purchases. Plus, your customers will appreciate the chance to upgrade before the increase arrives. This will boost loyalty and increase retention.
9. Don’t Over Prioritize Profitability
It can be tempting to maximize your profit margins by increasing your prices. But it’s important that customers don’t think you’re implementing a price increase to enhance your bank account.
Giving this impression can cause serious damage to your brand reputation. It may even drive customers away in droves.
Focus on the value you aim to offer. Avoid fixating on the income streams they might provide for you.
A useful tool like a markup calculator can help you determine the sweet spot for your pricing. You can ensure you still make an adequate profit without pricing yourself out of the market.
Picture 3. Focus on the value
10. Say Thank You
Thanking your customers for their patronage whenever you increase your prices is an excellent habit. You can express your gratitude for their support in a sincere way. Thereafter, be as honest as possible about why you need to raise your prices.
Be sure to inform your customers about why you’re requesting more money. Explain why your products are worth more now than they were at a lower price.
Most customers will be very understanding of your decision, and will appreciate your authentic gratitude.
Implementing increased prices with success takes tact, time, and a touch of temerity. Here are a few extra tips for introducing price increases without alienating your target market.
Introduce your price increase in stages
If you’re concerned about losing customers, try increasing your prices for a small group first. After the increase, gauge their reactions. If most of them accept the new pricing without issue, expand the increase to cover your full client base.
Focus on your company’s strengths
Remind your customers of the increased value of your products when announcing a price increase. Focus their attention on the importance of your business relationship. Highlight the strengths, achievements and benefits of your business, and tell them about your future goals and plans.
Your products and services need to solve their pressing problems—remind them how you aim to achieve this resolution.
If your price increase is inflation driven, reinforce the notion that you’ll maintain your products’ consistent good quality.
Add fees to cover costs
Instead of hiking the prices for products or services, why not add fees to cover increasing costs? The addition of fees is an appropriate approach when one specific cost, like transportation or raw materials, has gone up. Remember, if those costs ever go down, customers will expect the fees to decrease too.
Expect to lose and gain a few customers
Customers who focus only on price may look elsewhere once you raise your prices. You may well lose a few clients in the process. On the bright side, many businesses find that increasing their prices attracts new customers too. These customers are happy to pay a higher price for top quality goods and services.
Check and update your marketing materials
Ensure that you update all of your marketing materials across your retail and digital channels. Your marketing must reflect your new prices and conditions. Double-check all of your media to make sure your customers don’t receive conflicting information.
Refresh your customer communication strategies
You may need to rework your strategy for communicating with customers after implementing a price increase. Once you’ve settled on an appropriate increase, discuss your plans. Talk to your employees, managers, and marketers to make them aware. They can help you to think up innovative ways of announcing price hikes to your clients.
Be sharp with your customer support tactics
Give your customers the chance to speak to anyone in your company. Let them address questions or concerns with a customer support employee or manager. This form of personal communication fosters trust and promotes loyalty.
Offer to maintain your current pricing for customers willing to pay for your services upfront or in advance
Set payment limits and timelines for this special offer. This will keep your customers’ costs at their current levels but allow you to get paid sooner.
The Bottom Line
You may need to implement a price increase for a number of reasons. Ranging from increased operational and manufacturing costs, to business growth and economic inflation.
Communicate well with your customers. Offer them different options and add new features and value to your existing products to avoid losing them. Let them know why you are implementing a price increase. Tell them how the extra money will enable you to best serve them too.
Be honest, open, and transparent about your plans. Most of your customers will remain loyal to your brand for years to come.
Nina Sharpe is a content champion for various outlets, covering range of business topics from finance for startups to small business accounting tips.
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