Raising Prices without Losing Customers
Raising prices from time to time is essential for any small business. Keep your pricing the same and you may find you can’t get ahead, or worse, that your business can’t survive.
It’s recommended that business owners review their pricing annually. Some companies introduce price increases toward the end of the year. Communicating higher pricing in the fall provides customers enough notice to avoid sticker stock in the New Year.
So how do you set new pricing for your products and services without scaring away customers? These 5 strategies will help you ease your customers into any price increase.
1. Implement a grandfather clause
Some business owners reward customer loyalty with a grandfather clause; that is, customers who have patronized your business since you opened your doors get special pricing. Implementing a price freeze will go a long way to maintain goodwill and ensure your valued, long term customers continue their relationship with your company.
2. Phase in increases
No customer wants to be surprised when it comes to the cost of doing business with you. A phased in approach to raising prices gives everyone the opportunity to gradually adapt to your change in rates. Be sure to communicate your intention to raise prices well in advance of the first increase; the more time your customers have to get used to your higher rates, the more readily they’ll accept the change.
3. Clarify input costs
Unless your customers are running a business in your industry, they probably have little idea how much it costs to operate yours. Clearly communicate with your customers how cost increases impact your business. For example, airlines routinely increase seat prices when fuel costs escalate.
Inform customers whenever they drop by your office, include an announcement on social media, or put a notice in your next newsletter. You may be surprised how understanding people can be when they have a clear picture of what it takes to provide them with the goods and services they want and need.
4. Provide added value
One way to ease the pain of a price increase is to change your customers’ perceived value when doing business with you. Added value can be as simple as a few thoughtful extras that cost little to provide but make buying from you seem well worth the money. An example might be a complimentary resource, assessment, consultation or tune-up with any purchase. Keep a list of freebies you can provide so your customers always feel they’re getting great value and excellent service.
5. Handle complaints directly
In the age of social media, it’s easy for a complaint to snowball into a PR disaster. If you communicate clearly with your customers in advance of any price increase, you’ll likely avoid negative feedback. However, from time to time you might come across a customer who decides to vent about your business on their Facebook or Twitter feed. The best approach to negative feedback is to address it directly with your customer.
If you see a bad online review or an unflattering social media post, acknowledge it but don’t attempt to resolve the issue in a public forum. Contact the customer directly to explain your rates; communication is always easier without the scrutiny of an audience. Hopefully once you’ve made your case you can maintain a friendly, respectful relationship with your customer – even if they decide to buy from someone else.
- Use accounting software to assess the impact of a price increase on your bottom line financials.
- Your customer database is the lifeblood of your business. Be sure to invest in secure backup to safeguard your important data.
- Carefully monitor the impact of a price change on sales in case you need to make a correction.