How To Raise Your Prices And Keep Your Customers

Woman shopping
Source: Pexels

Dec. 28 2022, Published 8:00 a.m. ET

Share to XShare to FacebookShare via EmailShare to LinkedIn

Small businesses are in a quandary these days. Inflation, the pandemic, and supply chain disruptions have impacted their expenses, making it more expensive just to conduct business. And those inflationary pressures have also affected their customers. Consumers are looking for bargains and spending money on what they need, not necessarily what they want.

Many small businesses in this situation think raising their prices is the solution but are hesitant for fear of alienating customers. But it is possible to keep your customer and raise your prices.

Here are 12 ways to do it:

1. Be transparent.

Increased prices are a universal concern. Consumers are aware that companies are charging more and delivering less (we’ve all noticed the shrinking size of cereal boxes). So it’s important to be transparent and not hide the fact that your prices are rising.

If consumers think you’re not forthcoming, customer resentment could emerge publicly via social media for millions to see.

Harvard Business Review says using clear language when communicating price increases to customers is essential. In an article, Utpal M. Dholakia, Professor of Marketing at Rice University’s Jesse H. Jones Graduate School of Business writes, “Call the action a price increase, not a price adjustment, a price change, or another euphemism. While this may seem like a small thing, euphemistic messaging can cause serious harm, fraying the relationship with loyal customers.”

Many consumers are keenly aware of overall economic conditions, so when you tell your customers you’re raising prices, it just confirms their expectations, and most accept it.

Article continues below advertisement

While it’s harder for retailers and restaurant owners to hide higher prices, especially from regular customers, some service businesses try to sneak price increases into client bills hoping they won’t notice. Don’t do this.

If you own a service business or a B2B, let your customers know in advance that you plan to raise prices. You can even use the upcoming price rise as a customer retention technique. Explain to your customers that you will be increasing your prices, but as a reward for being a loyal customer, you will maintain their current pricing if they renew their contract now.

2. Don’t overexplain.

Your customers don’t need to know the nitty-gritty details. Don’t tell them about your profit margins or how you’re being squeezed by higher prices yourself. Just tell them the facts, such as when the price increase takes effect and what the new price structure will be.

This is also a great time to offer something “extra.” For instance, if you’re going to add 24/7 customer support (even if it’s a new chatbot) or free gift wrapping, let them know.

Article continues below advertisement

3. Don’t apologize.

Try not to come across as tentative or nervous since that may signal to your customers that you’re willing to negotiate. That’s a scenario you want to avoid. Don’t offer deals to some customers that you don’t provide to others. Customers often talk to one another, and if someone finds out another customer got a “break” when they didn’t, you will likely lose their business.

4. Research the marketplace.

What are your competitors doing? Have they raised prices in the past few years? By how much? Have they given their customers more value? Customers are more willing to accept price increases if everyone in your industry is doing the same thing.

Remember, it is very easy for consumers to comparison shop these days, so your customers will know if you’re charging more than other businesses in your industry.

Article continues below advertisement
Customers at record shop
Source: Pexels

5. Timing matters.

To get through a price increase relatively unscathed, you need to make sure your customers are satisfied with your products and services. Happy customers are more likely to be loyal and accept your higher prices.

Article continues below advertisement

6. Retain price-sensitive customers with email.

Price-focused customers may leave for other lower-priced options. That doesn’t mean you should abandon them. Depending on the type of business you own, keep them on your mailing list (unless they request to be removed). Their economic circumstances may change, or they may find the quality of your products or your exemplary service is worth paying more for.

Consider sending a “we miss you” email with a promotional discount to entice them to return to doing business with you.

7. Raise prices for new customers only.

Many B2B businesses can keep current clients at their current price level but charge higher prices for new customers. Be sure to let your clients know they’re getting special treatment: “Effective immediately, we will be raising our prices. However, because we value you as a loyal long-time customer, your price will remain the same for the next 12 months.”

You can also offer a discount to clients who sign (or renew) a multi-year contract.

Article continues below advertisement

8. Add value.

Create product or service bundles by adding features that don’t hurt your profit margins but positively impact your customers. Depending on your business, you can extend your service hours or offer bulk discounts. Consider creating a loyalty program where customers are rewarded when they reach pre-set spending milestones.

If you’re a retailer, consider offering complimentary gift wrapping if customers spend a certain amount of money.

9. Raise prices on some products or services and not others.

Try raising prices only on your most popular products and services. Since they account for most of your sales, this can significantly impact your revenues.

Article continues below advertisement
Two customers leaving store
Source: Pexels

10. Develop different levels of service.

You could create bronze, silver, and gold packages where the more customers spend, the more services they get. This works particularly well for home-service businesses like lawn care or pool maintenance. If weekly clients can’t afford the new rates, perhaps you could provide bi-weekly service instead.

Article continues below advertisement

11. Consider adding fees and surcharges.

Some businesses add fees or surcharges as a solution for a temporary situation, such as a surge in gas prices. This can be risky, though, since customers expect these additional fees to disappear when that situation changes. Do not promise customers that you’re temporarily raising prices and then keep them elevated. Customers will think you lied to them and will never trust you again.

12. Presentation is key.

Professor Dholakia says linking your price increases to a customer-centric value makes it easier for customers to accept them. When you tell them you’re raising prices, focus on any added benefits, such as expanded product offerings or additional services.

Of course, some customers will balk. Brainstorm with your team about possible customer objections and how to best counter them. You want all your employees to be on the same page so that no customers get preferential treatment.

Keeping customers despite raising prices is not that complicated. It’s about being open and honest and continuing to offer excellent customer care. Satisfied customers will pay more because they’ve come to know, like, and trust you. Maintaining that trust is the key to success.

This article originally appeared on Score.

Ambition Delivered.

Our weekly email newsletter is packed with stories that inspire, empower, and inform, all written by women for women. Sign up today and start your week off right with the insights and inspiration you need to succeed.

By: Score

Since 1964, SCORE has helped more than 10 million aspiring entrepreneurs. Each year, SCORE’s 10,000 volunteer business experts provide 350,000+ free small business mentoring sessions, workshops and educational services to clients in 300 chapters nationwide. In 2016, SCORE volunteers provided 2.2+ million hours to help create more than 55,000 small businesses and 130,000 jobs. For more information about starting or operating a small business, visit SCORE at Follow @SCOREMentors on Facebook and Twitter for the latest small business news and updates.

Latest The Main Agenda News and Updates

    Link to InstagramLink to FacebookLink to XLinkedIn IconContact us by Email

    Opt-out of personalized ads

    Black OwnedFemale Founder