If you are in a business that sells products or services, a time will come when you’ll need to increase prices. The price of materials goes up, overhead costs rise and labour costs are always a battle to control.  At some point, you will need a price increase to stay profitable. This can be tricky since you don’t want your loyal customers to move on to a competitor or to badmouth you on review sites.

Here are a few strategies for raising prices without losing customers.

Use competitors as a model

Look to your competitors as a model for considering how much to raise your prices. For example, if you sell the same product as other businesses in your industry and one of them recently raised their prices by 20%, you may also be able to increase your prices without encountering resistance. Look at your competitors’ reviews on social media to see if there are any negative statements.  If, on the other hand, your competitors are cutting prices, you might want to hold off on a price increase unless you can add extra value.

Be transparent

Be transparent about the reasons for the price increase. Explain why you are raising prices and give a reason your customers can relate to. For example, if you’re increasing prices because labour costs have increased in your area, include this information in your email or post.

A good way to position the increase to your customers might be:

 “We’ve recently had a price increase from our materials suppliers, which means we will have to raise prices on [product] starting next month. We know that this is an inconvenience for you, but we promise that the quality of our products will remain the same or improve.”

Provide examples of how the price increase will benefit them. This might include better service/quality or some other tangible benefit like free shipping on orders over a certain amount. Convince people that they will get more out of their purchases, and they will be less likely to complain about the price increase.

Increase the perceived value of your products

If you’re intent on increasing the price, boost your product’s perceived value, too. This will ensure your product stands out relative to what your competitors sell. Offer an improved product, a stronger warranty or guarantee, or something else that makes your product more attractive. Remind customers about your product’s benefits and how it makes their life easier or more pleasant.

Another way to increase the perceived value is to upgrade the packaging of your offerings. For example, switch from a plastic bag to a tin if you’re selling cookies. This makes your cookies look more high-end and worthy of the added price. Try different packaging materials or styles and see what appeals to your customers.

Provide incentives

Offer incentives for purchasing at a higher price point.  An upgraded service level may be enough to persuade customers to stay and pay more. Add a sense of urgency by creating a one-time offer. For example, give customers the option of locking in at the current price for a limited time. You could also limit the number of units you sell or only offer them during certain times of the year. This gives the perception of value and exclusivity.

If you sell a product, you can also create an incentive by adding a bonus.  If you increase the price, give the customer something extra when they purchase from you. For example, if you sell shoes, include a free pair of socks with every order. Or, if you sell jewellery, throw in a complimentary cleaning cloth with every purchase (and make sure it’s high quality).

Offer a less expensive alternative

Offering a less expensive alternative to a product or service is another way to avoid alienating customers. For example, if you are selling home security systems, offer a scaled-down package that includes cameras and other equipment but not sensors. This will draw in buyers who don’t require the additional features. Offering less expensive alternatives can also draw in new customers who are looking for a lower-tier, less-expensive alternative. Over time, lower-tier customers may upgrade to the more expensive alternative if they like what you offer.

Conclusion

Raising prices is never an easy task but may be a necessary one. As a business owner, ensure your customers understand why you’re raising prices and the value they’re getting in return. Be open and transparent.  Address customer questions and concerns.  Also, look at ways to increase the perceived value of the product or service that you sell.