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Running a business

How to announce a price increase while keeping customers happy

Business owners, whether big or small, want to be profitable. With this period of high inflation — 3.4% as of May 2023 — small businesses are under pressure to find creative ways to recoup their costs.

In 2023 alone, 23.3% of small business owners have raised prices by over 10%, according to a survey conducted by Ownr. So how can small businesses remain profitable without losing their loyal customers?

Here are a few ways to balance rising business costs while maintaining customer satisfaction in this current inflation era.

Announce a price increase

No one likes to be caught off guard by an unexpected price jump on their bill. So giving your customers a heads-up about an upcoming price increase is not only wise, but respectful.

Give the reason why you're boosting your prices — such as production costs, material costs, labour costs, and industry trends. Go further and explain how it will provide a better quality experience while sustaining your business. With this, your customers will be more understanding and open to the change.

Experiment with price testing

Play around with pricing to see if you can drive sales or earn more revenue per customer. The perceived value of your product or service will affect the demand from your customers.

For example, an artist who sells paintings at local art fairs can test out various pricing strategies to determine where the sweet spot is.

Create bundles or offer new products

You can create bundles and packages if your business offers multiple products or services. This way you can sell more products to the same customer, generating more revenue. You can also offer a discount on the package so they receive excellent value.

For instance, if you sell homemade jams in different flavours, you can create a gift basket with the three most popular flavours, and turn it into a limited edition variety pack. Yes, customers will receive a discount — but they will also be more likely to buy more products, which increases your overall profits.

If bundling products isn't an option, consider adding and marketing new products that yield higher profit margins. This can help offset costs with existing products that have a lower profit margin.

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Buy items in bulk

When materials go on sale or are in season, you may want to stock up. This can help to reduce the cost of goods, and the need to buy a product frequently.

For example, a restaurant franchise owner may choose to buy spices in larger quantities when it is on sale. Items like fresh berries can be stored in the freezer and used in the future.

Focus on customer acquisition

Attracting new customers can help grow your revenue and market share. You can do this by incentivizing your existing customer base to provide word-of-mouth referrals, or to give you positive testimonials.

For example, when your customer has completed their purchase, you can ask them to write an online review for your business. Thank them by offering a voucher they can redeem on their next purchase. When prospective customers see all the good reviews (especially from friends they trust), they will be more likely to support your business.

Increase the customer lifetime value (CLV)

The customer lifetime value is how much revenue you anticipate to earn from a customer over the course of a lifetime. Focusing on existing customers and how you can retain them by making them repeat customers.

You may try to cross-sell products and services so that your customers can try something new. For example, a salon owner can promote facials to customers who usually come in for a massage.

Ask for customer feedback

Sometimes your customers see things that are in your blind spot. Listen to your customers to find ways you can improve the customer experience. Doing so will help improve customer loyalty and retention.

A simple way to do this is by sending out a survey for customers to fill out. Review all the submissions and incorporate the suggestions so that you enhance the way your business operates. Customers will be thankful that you listened to them and proactively made improvements.

Be open to trying new strategies

Running a business is no easy feat, especially when you are dealing with rising costs or tightening credit markets. Use various strategies to grow your business while keeping your customers satisfied. And if a certain technique doesn't end up working for your business — consider it a lesson learned, and try something new. Provide tons of value and a positive experience, and your customers will want to come back for more.

Whether you're a solopreneur, side hustler, or small business — bookkeeping shouldn't be complicated. Financial management solutions like QuickBooks can help save your business time and money, freeing up your energy to focus on serving your customers. Start tracking your small business expenses with QuickBooks today!

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