In a competitive environment it’s hard enough attracting customers to do business with you, so how do you raise your prices and retain their loyalty?
Do a search online on asking for a pay rise and you’ll have thousands of articles at your fingertips for employees to outline why they deserve one and how to negotiate one with you. The same principle applies between you and your customers, only this time you’re the employee and your clientele is the boss.
It can be a difficult conversation to have, so here are a few tips to strengthen your argument and make the transition a smooth one for all.
1. Justify the rise
Questions you should consider:
- Do you really need to raise your prices?
- Why do you need to change your prices?
Supplier price hikes, the rising consumer price index (CPI), or simply a better reflection of the value of your services—these are all common reasons for raising your prices or rates.
2. Decide on your pricing method
Ask yourself:
- How much?
- How often?
Many businesses choose to raise their prices periodically, for example every financial year, whereas others choose only to make an increase every few years. If you plan on committing to regular price rises, the amount can be modest; if your rates are unlikely to change for some time you need to make sure the leap will serve you well for a few years.
3. Restructure your offering
One way to make a price increase more palatable is to repackage your offering at the same time. It’s the same principle as increasing the price per gram of tomato soup but offering it in different portion sizes.
You can restructure your offering in a couple of ways. If you sell product, you can offer the old price for purchasing more than one, for example, or you can group the product with other things that still represent a good deal.
If you offer a service, consider a tiered approach. You need to be able to offer options to people who want to continue doing business with you but who may not be able to afford the price increase, so perhaps offer a reduced service for a reduced fee and a higher level of service for the higher rate.
4. Communicate the change
Give as much notice as you can; don’t surprise people or only mention it as a reason for a larger invoice.
Work out the factors or combination of factors that will contribute to the increase and outline them for your customers. You do not need to go into detail or explain your motives, but giving a reason does help the customer receive the news and assures them not to take it personally.
Small, regular price rises make more sense to customers and are generally easy for them to wear, especially long-term clients who get used to, and expect, the increase every year. However, less frequent increases may be easier to administer and in some cases you can justify the change better by mentioning you haven’t raised prices in a while.
5. Be confident
Have confidence that your customers are receiving an above average product or service, then you can be confident in your pricing. Remember it’s ultimately about the value of your offering over the cost.
Your confidence needs to extend to the way you communicate a price increase. Consider telling your customer in person or over the phone. Be yourself and use your normal tone and language. Don’t take the easy route and revert to a formal explanation in corporate speak, if that is not how you normally communicate to your customers.
Also be approachable to customers who may want to discuss the increase with you—this is a good sign! It means they feel comfortable engaging with you and you are more likely to secure a better outcome for the both of you.
Raising prices isn’t fun. But if you have a plan for making it happen that feels right, you will find it much easier to do.
