Every business owner has to look at increasing prices from time to time. Price increases can occur for a multitude of reasons, including in response to increased business costs and changing consumer demand. So, how do you know it’s time to increase prices? And, just as importantly, how do you do it without getting your existing customers offside? Let’s find out…
Signs it’s time to increase prices
- Demand continues to grow
If demand for your product is exceeding your capacity to meet it, then this is a great indication that a price increase is appropriate. Note that the stage and model of your business may influence whether you increase prices or hire more staff to meet demand.
- Business costs have increased
If your supplier raises its prices or if other overhead costs increase outside of your control, then increasing your prices may be your best solution. If this is the case, it’s important that customer demand is sufficient to sustain a price increase. In this scenario, you may look at a smaller price increase in conjunction with other strategies for reducing overhead costs.
- Current prices aren’t aligned with your market
If your prices are drastically mis-aligned with those of your competitors, you may be selling yourself short. Maybe you haven’t raised your prices in some time, or perhaps your market has grown rapidly in a short period of time. Regardless, it’s important to be aware of your competitors’ prices and consider the benefits of aligning yourself within your market. Consider what other points of difference you have that may appeal to your clientele outside of a cheaper price; strong history of results, great customer reviews, better product/outcomes, community engagement, environmental sustainability etc.
How to raise prices without losing customers
- Honesty is the best policy
Consider the best time and place to communicate a price increase to your customer base. Be open and honest about your reasons for increasing prices. The worst thing you can do is try to ‘pull one over’ on your customers – no one likes to feel they’ve been tricked. So get ahead of the game and control the narrative about why you’re increasing prices now. Remember to explain your reasons for increasing prices, but avoid the urge to apologise.
- Show your loyal customers they’re important
Lessen the blow by showing your most loyal customers just how important they are to you. Consider what you can give or offer them as a gesture of your appreciation for their continued business. Or even better, think about how you can add more value to their service bundle and/or overall customer experience.
- Focus on the quality of your service
Now that prices have increased, it’s more important than ever to maintain your existing quality of service. Even better, think about what room you have to improve. Customers who stick with you through a price increase will be more hyper-aware than ever over the quality of your service. In other words, now is not the time to stuff anything up!
We hope this helps give you a more solid understanding over when and how to increase prices within your business. Remember to communicate honestly, avoid apologising and always show appreciation to your loyal customers.
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