One of the most difficult things for a company to pull off successfully
is a price increase. And for good reason: most people don’t like paying
more for something they’re currently purchasing for less.
difficulty you might face in raising your prices and retaining
satisfied customers, however, is not justification for not raising
prices. Sometimes it’s necessary, and sometimes it’s more than deserved.
Raising prices and surviving to tell about it requires tact. Pricing
may largely be a function of supply and demand, but purchasing
decisions are often based on subjective factors that a price increase
can negatively affect.
Here are five suggestions for raising prices without forcing your customers to stampede to the exit.
Add something new to the mix
Even if you’re already providing a level of perceived value most of your customers would be willing to pay more for, sometimes adding something to your offering will help blunt any negative reaction to the price increase.
Change your model; don’t just raise prices
In many cases, a price increase becomes necessary to address customer segments that are unprofitable, or that are disproportionally impacting (in a negative fashion) other customer segments that you serve. In these instances, it may be worthwhile to change your pricing model. A good example of this can be seen in the U.S. mobile market, where carriers are increasingly recognizing that it’s better to charge data hogs more so that they can provide lower prices for the vast majority of their customers.
Have a justification
No matter what is causing you to raise your prices, it should go without saying that you need to have that legitimate rationale in place before you implement a change. If you have any question about whether you have a strong enough rationale for raising prices, you should go back to the drawing board.
Explain the increase
In most industries, some amount of pricing transparency is desirable or even necessary. If you have to raise your price because the cost of labor has significantly increased, for instance, it’s probably worth explaining that to your customers and making the case that passing some of the increased costs along are necessary to keep the company they trust operating in a healthy, sustainable fashion. While there are always likely to be a few customers who won’t like your justification, most people are reasonable and know a legitimate rationale for a price increase when they see one.
Provide ample warning
Don’t catch your customers off guard. They deserve to know that a price increase is coming and they also deserve time to plan for it. Obviously, the lead time that’s appropriate will vary by industry, but in most cases, anything measured in days and not weeks or months is too short. After all, your customers may need to reallocate resources, and even if they don’t, most will appreciate the courtesy.
Photo credit: greggoconnell via Flickr.