How to increase prices without losing customers

8 tips to increase prices and keep customers 

With a higher inflation rate, businesses need to increase their prices to remain profitable. However, many business owners are concerned about losing customers due to price increases and this, in fact, can happen. So the question is: how to increase prices without losing customers? In this article, I’ll give you 8 tips to increase prices without risking losing customers. 

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• How to increase sales 

Price increase strategy

First of all, when thinking about a price increase strategy, you need to roll out new prices before the crisis hits, not during the crisis when your customers may be experiencing difficulties just like you and they would be hit hard by your price raise. Knowing the overall economic situation and where things are going, you need to plan your pricing policy in advance. In a high-inflation environment, you need to increase prices at least twice a year. So let’s look at how to raise prices without angering your customers and maintaining good relationships. 

How to increase prices for existing customers 

1. Eliminate your fear of losing customers

   
   The first obstacle to overcome is your own mindset, so start with overcoming your fear of losing customers. Know that if you roll out new prices correctly, it probably won’t happen or not in high numbers. Apart from that, have a plan B on how to acquire new customers to fill the gap.

    

2. Start increasing prices as soon as possible

   
   Keep analysing your pricing and profitability and make quick decisions to make sure your business remains profitable.

    

3. Know your competitors’ pricing

   
   Compare your prices with the market average. You may find out that your competitors have been increasing prices and you are below the average. If this is the case, you don’t have a high risk of losing customers as they won’t have a lot of cheaper options.

    

4. Give reasons

   
   When increasing the price, communicate the reasons. What are the good reasons for that? You can’t just say ‘because our services are worth it’, that’s not a good enough reason. You need to clearly communicate the value you deliver. If you deliver more than your competition, you can also charge more. The key to this is how customers perceive the value and how you present it, so you may need to work on finding the best ways to communicate it. 

    

5. Test your new prices

   
   If you increase prices to your entire client base, you don’t know how they will take it and you risk losing some or even many of them. To minimise the risk, select a small group of customers and see how they take the price increase. 

    

6. Be aware of your customer satisfaction

   
   Before a price rise, find out if your customers are happy with your service and communicate the increase at the point when they are most satisfied. 

    

7. Plan how to communicate the price increase

   
   Prepare your employees to talk about the price rise with customers. The way they will talk about it plays a vital role in customer retention after a price increase. Make sure your employees don’t blame the boss for higher prices or say things such as ‘they told me to do that’. Your employees need to understand why you have to increase prices and how to talk about it not to lose customers. These are the dos and don’t of communicating the price raise:
   – Don’t apologise
   – Don’t justify it with increased costs
   – Communicate the increase of value (and deliver more or better!) 

    

8. Give a reasonable notice period

   
   Your customers may be feeling growing inflation already, so soften the hit by giving them time to prepare. The bad news of a price increase won’t be as severe if it’s not immediate. Give at least a 1-2 month notice (unless you have contracts that require more). 

    

9. Create new packages

   
   To make the price increase more acceptable, offer lower prices for bigger purchases. By creating product or service bundles you will increase sales and your customers can still make some savings by avoiding the higher prices for single purchases. 

Bonus tips

What if customers threaten to leave when you propose a price increase?

If your customers communicate they may leave due to a price rise, negotiate. What can you negotiate?

• You can negotiate value. Ask how you can improve your offer to provide higher value for them (the key is what would be a valuable improvement for them, not what you think might be).
• Increase prices in stages, e.g. instead of one larger increase, raise prices two-three times every two months. Instead of negotiating the amount, negotiate the timing. 
• Do it with a longer notice, and negotiate how soon they will have to pay more. 

What if you lose customers after a price increase?

If you lose customers due to a price increase, this means that the only reason they bought from you was your low price. This is an important signal that you need to look into improving your service!

Summary

These are my tips on how to increase prices without losing customers and have a good customer retention. If you fear angering customers due to price rises, you’re not alone. We all do. It’s never good news for your customers, so you need to do it gently, in small steps and take special care of maintaining good relationships and communication.