Raising your prices is the easiest and quickest way to make more profit. Yet, many businesses are afraid to lose prices because of the prospective negative impact on sales.
However, if done right, one doesn’t have to come at the expense of the other. You can raise prices while keeping your customers.
It’s all about the delivery of how you go about increasing your prices.
First, let’s assume you’ve already done enough modeling of the numbers to make sure you’re making the right decision.
You generally know when to raise prices when:
- Reverse engineering what needs to be charged to at least breakeven
- Whether the cost of an input has gone up (e.g., labor, materials, financing)
- Looking at what your competitors are doing
Here’s how to communicate a price increase to your audience the right way.
1) Notify your team members first
Your customer service, sales, and marketing department will be impacted by this decision. They should be the first to know about it.
2) Reach out to your customers, and make it clear what’s happening
For example, if you’re Netflix or a landlord, you don’t “silently” raise prices. You announce in advance, by how much and when. This is true for any recurring service.
3) Use different channels to communicate
You should prioritize the channel of communication your customers are used to. Email is most common. But you can also notify via mail or phone. It comes down to the relationship you have with them.
4) Give plenty of notice
Notifying your customers two months in advance is the sweet spot for a price increase, especially if it’s a subscription charge.
If the price increase has different implications for different types of customers, segment your message. Also, you can personalize the message according to how long your customers have been with you.
If possible, provide something special to loyal customers.
6) Be informative but brief
Convey the exact increase, why you’re increasing it, when it will take effect, and if there is any action needed on their part.
But don’t overdo it. Too much explanation can sound defensive and apologetic. However, don’t be too brief either, or it will look like you do not care.
7) Create a FAQ page to address the most common questions the price increase might raise
This will also save your customer service team time if answers already available online or through a Google search. Consider linking to the FAQ page in your email.
8) Add a clear way to reach out to you
The information in the announcement and the FAQ page might not be enough for some customers. This is especially true if it’s a high-end product. Tell them how they can get support.
9) Don’t do it more than once a year
Before announcing the price increase, make sure the price will stay the same for as long as possible. At least one year. There may be some exceptions depending on what you’re selling or if it’s heavily tied to the cost of an input (e.g., food, fuel). But for technology products, once a year is generally a good spot.
Nobody wants to send or receive price increase announcements. But these tips will make the process smooth and help you retain your customers.