You’ve probably heard Benjamin Franklin’s famous quote, “Nothing can be said to be certain, except death and taxes.” Well, you can add another certainty to that short list: prices will always go up. Business owners know it, but luckily most consumers expect it as well. So you shouldn’t worry too much about losing customers if you raise your prices. Of course, if you’re in a competitive industry, you’ll likely have to work a little harder to keep your customers.
There are many signs it’s time to raise your prices:
- Your operating costs are going up. Obviously, when costs increase, you need to raise your prices to still make a profit.
- You need to hire. Adding employees increases expenses, including salaries, employer taxes, equipment, office space, higher utilities, etc.
- Your prices aren’t equal to the service you’re providing. If your unique selling proposition (USP) is first-class service, your prices should reflect that.
- You’re booked 24/7. If your business is doing so well you need to turn away clients, it’s likely time to raise your prices to increase profitability.
Don’t raise your prices just because your competitors raised theirs. Unless your price increase is motivated by something obvious, like increased industry demand or higher cost of obtaining goods, don’t rush into an increase. Do the math and weigh your options. You want to be able to explain the reasons for the price increase to your loyal customers. To help you prepare those explanations, here are eight more ways to keep customers from freaking out over a price increase:
1. Give Fair Warning
Loyal customers expect to be informed in advance when a price change is coming, and rightly so. Post the price change on signage and on your website. You can also use the upcoming price change as a marketing tool to encourage last minute sales before prices go up.
2. Make the Price Increase Part of a New Sales Model
If you offered “buy one, get one free,” change the model to “buy 10 for an overall discount.” The customer ultimately ends up paying more, but still feels like they are still getting a deal. Cross-selling is another effective way to increase sales of related services while focusing on the needs of your customers. Offer an add-on service as part of a bundled price.
3. Let Clients Know How Long Prices Have Been at the Current Level
For instance, you could say, “After five years of bringing you the best service we can at the lowest prices, we have found it’s time for a price increase.”
4. For B2B Businesses, Price Increases Often Accompany New Contracts
It all comes down to client satisfaction and the value of your relationship, so make sure you don’t raise prices if your customers are not satisfied. Companies that offer top-tier service can command top-tier prices. The end of a contract period is usually a good time to raise prices without disrupting the relationship.
5. If You Don’t Want to Raise Prices on Your Product or Service, Try Adding on Fees
Then, if you want to remove the fee later, you won’t confuse customers. You can also keep the regular price on previously offered products or services while offering a new and improved version for more. Eventually, you can stop selling the original. When improvements are involved, customers understand clearly the price increase.
6. Do You Have Customers Who Do Business with You Solely Due to Low Prices?
For price-conscious customers, a price increase will likely send them looking for a cheaper alternative. Don’t take them off your marketing list yet. Offer discounts at the beginning of the new pricing structure to entice them to stay with you. Emphasize the advantages of sticking with you and how familiar you are with their company and account.
7. Consider Branching Into a New Market
You could offer your products or services to a more affluent customer base that will easily accept higher prices. Keep your current customers at their price point until you’re sure you can target customers who are willing to spend more.
8. Before You Break the Higher Prices News, Emphasize the Value of Your Product or Service
Then offer a lower-level plan to see if customers are willing to pay less and get less. For the most part, customers will want the same value, and likely won’t want to downgrade their agreement. If your price increase is reasonable, there shouldn’t be a problem charging more.
The last thing you want to do is find your business in the middle of an unsustainable price war with a competitor. Should you find yourself in that position, here’s how to get out of it.