Increasing prices is a part of business. It is essential in a number of situations, including to cover rising costs or to help your business grow in the future. Increasing prices is rarely an easy thing to do though. This leads to delays as business owners fear they will lose customers as a result of the change.
It is possible to increase prices without losing customers. Here are some strategies you can use.
Price The Increase Sensibly
The easiest way to put off a customer is to implement a large price increase overnight. That doesn’t mean you shouldn’t be paid the higher price if you think your product or service is worth it. Instead it means you should use a different strategy to reach that higher price. This could include implementing smaller, incremental changes, or increasing the price of certain products while minimising the increase on others.
Be Honest About The Increase
It is never a good idea attempting to implement a price increase without anyone noticing. It is possible, of course – if you sell 65kg bags of widgets you can reduce the bag to 62.5kg but keep the bag the same price. Some of your customers may not notice, but those that do will not be happy. The best option is always to be straight with your customers.
Notify Your Customers
Nobody likes getting hit with an extra charge out of the blue, so always notify your customers before you implement a price increase. Make sure you give them a reasonable amount of time too – the day before the price increase comes into effect will simply lead to annoyance.
Explain Why You Are Doing It
You should only give your customers as much detail as you are confident divulging, however the more they understand the reasons for the price increase the more likely they will willingly accept it. Examples of price increase justifications that most people will accept include the increased cost of raw materials, or that your business is investing in improved products or services.
Talk About Value
When discussing the price increase with your customers don’t only talk about price. It is much better for you if the conversation is about value. For example, you can explain how the customer has benefited from upgrades, enhancements, developments, or improvements to your product or service that have not incurred a price increase. Another example is talking about the improvements that you plan to make in the future, and how the customer will benefit from those.
Get The Timing Right
Sometimes timing is important when implementing a price increase. For example, retailers can use the seasonal or periodic launch of new products to increase prices. This will differ for every market and industry, but getting the right month can make a price increase go much smoother.
Offer An Alternative
Another option you have is to offer an alternative. This works well in many situations, including with businesses that compete heavily on price. It works be telling your customer that you are increasing the price for what they currently receive, but they also have the option to pay what they are currently paying for a slightly reduced service. This maintains the value of your product or service.
One final thing to remember about implementing a price increase is that it requires planning. It would not be unusual for the process of discussing a price increase, deciding on that increase, communicating it to customers, and implementing the increase, to take several months. If you are implementing it incrementally it can take even longer, so make sure you plan.
For advice and help with your business please contact a member of the Gilroy Gannon team today.