It’s a challenge every business faces at some point in its lifecycle—the need to raise prices in order to maintain operations and secure revenue to finance future growth. But the marketplace is littered with companies that attempted to achieve this goal but lost much of their valued customer base. One wrong step along the price-increase process and customers can feel mistreated, alienated and turned off enough to no longer purchase the company’s goods or services, even if they’ve been rewarded in the past with quality care and products.
The key to raising prices is designing the right strategy, coupled with a sense of timing and an all-out communications effort to persuade a loyal customer base that the price hike is both appropriate and promising of better things to come. Here are tactics to consider when you’re ready to raise prices:
Leave no ambiguity about the services you provide. Hopefully, you’ve laid the groundwork to clearly differentiate between what your business provides and how it stacks up compared to what’s offered by the competition. But it never hurts to further expand upon how your specific solutions effectively address problems that your customers can’t find elsewhere.
A good time for a price hike is when you can upgrade your product’s differentiating factor into an even more streamlined solution for the problems your customers face.
Incorporate price hikes in your strategic plans. Some companies mistakenly wait for what seems to customers an arbitrary time to suddenly announce a price increase in their goods and services. Instead, consider incorporating a comprehensive pricing strategy as part of your long-range business objectives, thus anticipating the influence of market forces, competitive gains in the marketplace, and other factors.
Being in a position where you can anticipate the next scheduled price hike enables you to prepare your customer base for that eventuality.
Investigate tiered pricing opportunities. Different customers may be willing to pay different prices for your business offerings. Multiple price points often make sense for retail and service businesses but can be applied to any business that offers a tiered pricing system with varying levels of service (or product upgrades) at different prices. This approach also gets customers more comfortable with price increases, making it possible to introduce across-the-board price hikes at a later date.
Communicate intentions in a positive light. Any increase in costs to customers will incur some level of push-back. For this reason, it’s critically important to communicate ahead of time your intention to take this step. Moreover, framing your message in a positive light—rather than blaming inflation or your own manufacturing/distribution expenses—can smooth the path toward eventual acceptance.
Emphasize your ongoing commitment to the highest product quality and most efficient customer service, as well as any investments your business has made in expanding personnel or acquiring state-of-the-art technology. Price increases go down better if the customer feels your business is spending money to improve its quality for them.
Test a price increase. It’s natural to expect objections from customers, but that’s not always the case with a rise in prices. “Your best customers might even wonder why you haven’t done it sooner,” notes Small Business BC, which adds that if you do have concerns about your existing client basis, “you could always introduce the changed pricing on new clients only.” This helps you gauge the effect of higher prices for your products in the marketplace.
Finally, help cushion the impact of a proposed rise in prices by offering one-time consultation services or other form of specialized assistance to your customers. This demonstrates how important they are to you, as well as your willingness to go above and beyond on their behalf.
Want to learn more about strategic planning and price increases? Find out if a TAB Board is right for you!