As a small business, raising the prices of your products or services can be nerve-wracking.
While the need to increase prices can mean your small business is growing, it isn’t always easy on the ears of your customers … particularly if you’ve developed a close relationship with them.
While we can’t promise that a customer or two won’t stray following a price hike, we can provide a few tips and tricks for making the transition easier along the way.
Tell Your Customers Up Front
When it comes to increasing prices, you mustn’t beat around the bush when informing your customers. The last thing you want to do is surprise them with a big bill following a routine purchase.
Be Honest, but Not Too Honest
As your small business grows increasing prices will at some point be a necessity. But the reasons for doing so can vary:
- You have more work than you can handle
- Your skills and services are evolving
- Your business expenses or overhead costs are increasing
Providing context as to why you’re upping the cost of your products or services can go a long way with your customers when it comes to building trust. But, keep in mind not to over-explain your reasons for doing so. Too much information can confuse your clients and may cause them to question your pricing.
Rather, focus on how the increase in cost is benefiting them. For example, if you’ve recently completed additional training that allows you to provide your customers a superior service, let them know.
This transparency ensures customers don’t feel like you are raising prices just to raise prices. Even the smallest hint of that could cause customers to feel taken advantage of and make them jump ship.
Take control of the situation and proactively let your customers know about the impending price increases. The higher the increase, the sooner you should let them know. This lets them know you aren’t trying to be sneaky and shows you appreciate their business.
Informing your customers in advance can also provide an opportunity to sell your services. If you let your customers know a price increase is coming, you can give them the option to purchase your product or service in advance at a lower cost. They’ll be happy that they got a chance to buy before the price increase.
Stand by Your Decision
Increasing prices isn’t a decision that is taken lightly. You’ve put time and energy into ensuring that you are making the right decision for your business. So stick to it.
While it is important to be understanding that your price increase may have an impact on your customers, don’t apologize for it. Remember, as a business owner, keeping your doors open costs money, and often you are at the mercy of market changes and external factors that are out of your control. Plus, an apology may cause your patrons to question the legitimacy of your reasoning behind the price hike.
In addition to being steadfast in your dedication to the price increase, it is equally important to ensure every member of your team understands the upsurge and rationale behind it. You don’t want to have the same customer booking appointments with two different technicians to find one of them is charging less than the other. This can make your customers confused and wonder if the price increase is being distributed selectively.
Making for a Smooth Transition
Informing your clients about a price hike can be anxiety-inducing, no matter the reason. In addition to following the tips above, you can soften the blow and make the transition to higher prices a little easier to swallow.
Create Additional Value
Raising the price of a product or service without adding any value most likely won’t fly with customers. By altering your product or adding features to an existing service customers will feel the value is worth the increased price.
Roll Out New Costs Slowly
If you are really worried about how your customers will respond to a price increase or if you’re worried you picked the wrong price, ease your customers into it. Test out new pricing with a small group of clients first to see if there is a negative response. This will allow you to beta test your new and improved product or service at the higher price.
This not only gives you valuable insights but provides the opportunity to make adjustments prior to a formal announcement.
Don’t Raise Prices Across the Board
Try raising prices on select products or services. Since your more popular offerings account for a vast majority of your sales, raising prices here will have a larger impact on your revenues while still providing lower-cost options.
This also forces customers to truly consider the value of the product or service by allowing them to compare it to a lesser-priced option. A decision must be made from the customer’s perspective. This forces them to focus on the value of the product or service rather than just the price.
Develop Pricing Tiers
Consider adding tiered options to your products and services. For example, a spa could offer a deluxe facial at a new, higher price while still offering a basic facial with fewer features at a lower cost. As mentioned above, this forces the customers to consider the value of the product or service.
Do What’s Right for Your Business
Whatever the reason may be, raising prices can be necessary for your business to succeed. While customers may not like the idea of paying more, communicating clearly is the key to developing successful and long-term relationships with your clients.
Remember: Not Everyone Will Love You
Some people will only work with your company if the price is right. Raising prices may cause them to jump ship and look for similar products and services at a lower rate.
This doesn’t mean you should lower your prices to accommodate these people. They aren’t the right customer for your businesses. Raising your prices while concurrently providing quality products or services can attract new customers. These customers will value the quality you provide rather than simply focusing on a smaller price tag.
With intentional planning and a considerate approach to informing customers, you’ll find that a price increase may not only boost your profitability but can transform your business.