Businesses need to raise the price of their product or service from time to time. Price increases are sometimes necessary to keep your business going while offering excellent services to your customers. However, companies always risk losing customers or making customers angry unless it’s done with a proper strategy.
In this article, we will share top tips from renowned entrepreneurs on how to increase prices without losing customers.
1. Announce the price increase in advance
Honesty is an essential attribute in business. Let your pricing be transparent, so your customers will appreciate what they are paying for.
If you are a large company with a lot of media attention and a large customer base, then you should consider announcing the price increase in advance. Means, this should be done before the new price takes effect. It could be in the form of a press release on your business website. Give your customers time to allocate funds for your price increase.
2. Explain the reason for the price increase
Promptly tell your customers why the price increase is necessary. Provide adequate information. For instance, if you sell products, the reasons for a price raise can be due to an increase in manufacturing cost, higher minimum wage, transportation, tariff, and others.
Try not to give an impression that you are doing it merely for the profit.
3. Consider your timing
Timing matters a lot in everything, especially during a price increase. The best time to raise your prices is when the majority of your customers are deeply satisfied with your product or service.
It would be wrong to increase prices after you just had a few bad customer reviews or complaints. You should improve your product or services a few months before raising your prices.
4. Raise price gradually
Instead of increasing the price in one swoop, you should consider a more systematic approach. Though this may not work for all businesses, the idea is to try to raise prices as little as possible, and not too often.
For instance, if you offer services, you can consider raising your prices by a few dollars every six months.
Alternatively, you can increase the prices in badges. First, start selling to new customers at the increased price and then gradually increase the cost for old customers.
5. Add extra charges
One way to easily get away with a price increase is to add additional charges or surcharge for specific reasons. For example: If you run an online boutique or store, you can discontinue free shipping and pass it as an extra cost to your customer.
6. Offer another inferior + cheaper priced option
While this may not be feasible for all businesses, offering a second, less pricey option can be the trick to keep your customers happy. You can easily create lower plans with fewer features for your services.
Your customers will then have to decide between choosing value over price.
7. Offer more value
People usually judge the cost of a product or service by the benefit they get from it. So if you want people to pay more, you should offer more value. Consider adding up something extra that will cost you less, but would be very valuable to your customers.
For instance, customers will be willing to pay more if you offer a higher quality of the fabric. The same goes for food; when the food quality or the ambience of a restaurant improves, customers won’t mind paying the extra cost.
8. Find more customers
You have to come to terms with the fact that not all your customers will be happy with the price change, no matter how hard you try to convince them. Some customers are more price-sensitive than others, so you can’t keep everyone happy.
Even if you lose a few customers, there are still thousands out there. You have to work hard and expand your customer base, getting people that can rightly pay for your product.
9. Reduce the size
Notice the serving size at your nearby restaurant use to be bigger. Reducing the quantity by 5%-10% is a fairly legitimate idea, and customers do not even notice it, however if they do notice it then can very well backfire. While some customers would appreciate that you did not increase the price, others would confront that they would rather pay the increased price than a smaller serving size.
10. Discount on the bundle
Increase the price of individual products or services, but offer a discount if they are ordered together as a package.
You should also ensure that everyone in your company is aware of the new prices, to avoid unnecessary confusion.