When it comes to business, it’s not uncommon for owners to avoid discussing money. Many business owners are hesitant to raise prices and potentially harm a good relationship with their customers. But what happens when increasing costs have already been absorbed and there is no other option? Sometimes, it’s either raise prices or close up shop.
Inflation is currently a big issue for many businesses, and as a result, they are considering raising prices. In some ways, this is an easier pill to swallow when preparing to charge customers more. However, it’s not always easy to raise prices, even when it’s necessary. Some business owners put off increases because it’s uncomfortable, they don’t want to break promises to their most loyal customers, or they’re worried about customers becoming angry, complaining, or leaving.
However, there are valid reasons to increase prices beyond inflationary realities. For example, if the value of your product has grown, such as adding new features, increasing the quality of your product, upping service levels, or otherwise increasing the value your customers are getting from you, it’s time to charge more. If the market has changed or you understand it better, or you want to change your position in the market, then increasing prices may be necessary.
The way in which you communicate a price increase is crucial to preserving relationships and trust. Confusing communications that dance around a price increase are less than useless and leave the door open for distrust and discontent. When you’re ready to increase prices, the first thing you need to say is, “We’re increasing prices.” Even when it’s hard (especially when it’s hard), over-communicate, acknowledging the impact of the increase and reinforcing the value you’re providing.
It’s essential to underscore the value add of your product when communicating the price increase. If possible, explain that you’re raising prices because you’re adding more features or upping the value of your products. This only works if it’s actually true, but the more you can frame your price increase around the benefits to your customers, the better.
Honesty is the best policy when it comes to communicating a price increase. If you’re raising prices because of inflation, use the narrative around inflation. If you’ve held off as long as you could and can highlight how long you’ve been able to keep prices the same, despite mounting pressures (from rising materials prices, increased service costs, higher rents, etc.), let your customers know. Give your customers some credit – prices are going up everywhere.
Timing is critical when communicating a price increase. The earlier you can communicate a price increase, the better. It builds goodwill with your customers. The nitty-gritty of getting people in the loop is also important. There’s the baseline communication to all your current customers explaining the increase. Again, this communication should be clear and concise. Advanced warning or quick follow-ups with individual key customers are critical too.
If appropriate, consider going public with your price increase. While this step is conditional on your business, a blog post, video, or other public content on your website reiterating and explaining the price increase means that not only is the information widely available, but your customers won’t think the hike is personal to them.
It’s essential not to let guilt cause you to put off the inevitable at the expense of your business. Prices regularly rise, and it’s crucial to communicate these changes clearly and effectively to maintain trust and positive relationships with customers. By following these steps, you can increase prices while preserving your relationship with your customers.
One final piece of advice for raising prices is to be prepared for pushback from some customers. It’s natural for some people to resist change, especially when it involves paying more money. However, if you’ve done your due diligence in communicating the increase, emphasizing the value add, and being honest about the reasons behind the price hike, you can confidently address any concerns or complaints that may arise.
In some cases, you may need to negotiate with certain customers who are particularly resistant to the price increase. This could involve offering discounts or other incentives to soften the blow, or simply being willing to listen to their concerns and work together to find a solution that works for both parties.
Ultimately, the decision to raise prices is never an easy one. But if you’ve determined that it’s necessary for the health and growth of your business, it’s important to approach the situation with confidence, transparency, and a commitment to maintaining strong relationships with your customers. By following the tips and strategies outlined here, you can navigate the process of raising prices with grace and professionalism, ensuring that your business continues to thrive for years to come.