Part 2 - Field Guide

Tips To Raising Your Prices Without Losing Customers

As business owners, you know that raising the prices of your products or services is not as easy as it sounds.  The following tips are only suggestions. Every business has a different set of circumstances and must act accordingly.  Our first suggestion is to look before you leap!  

Keep in mind, the more loyal your customers are, the easier it is to increase your prices without much pushback.  Ask yourself these questions and be honest… Are your customers more Transactional (meaning price and availability are the most important factors for buying from you) or are they Relational (meaning they buy from you based on the relationship you have with them)?

1. Time It Right: The best time to raise prices is when you’re sure your customers are satisfied with your product or service. If you’re planning a price increase, be especially diligent about proving your worth in the months before you do so.  

2. Plan Ahead: Before raising your prices, make sure you’ve considered not only your current costs but also any cost increases that are likely to happen in the next year or two. You don’t want to go through a huge struggle to raise prices only to find that four months later you need to do it all over again.

3. Add Extras:  Customers are far more likely to accept higher prices if they’re getting something extra in the bargain. Consider what you could throw in with your current product or service that would cost you little or nothing but would have a higher perceived value to the customer. For instance, you could offer free gift wrapping or a free e-book on a relevant topic.

4. Promote Specials:  While this is always a good idea, putting extra focus on special products or selections can take the attention away from increased pricing.

5.  Do NOT Promote or Apologize for Price Increases:  While you will see many businesses display a sign trying to apologize and explain why they have raised prices, we suggest you don’t do this. There is no need to apologize. Increasing prices is a common thing. If someone mentions the increase, you simply say, “Yes, due to increased costs we had no other choice. We hope you still enjoy our quality product and exceptional service”.

6. Reduce Portions/Sizes: Risky but if approached carefully can be effective, especially for restaurants. With food waste being a primary cost, reducing serving sizes can be the ticket.  To offset this, you can offer an extra serving for a reduced cost. For example: The original order of fries is $1.99 and a large or extra order is .75 more; Instead of serving 15-ounce servings, serve 12-ounces; Instead of a ½ pound burger, serve slightly smaller.

7. Temporarily Add or Raise Fees: You can avoid raising prices on your actual product or service by adding fees. Utility companies do this all the time, and many smaller businesses used the tactic when gas and electricity prices soared a few years ago. This is a good strategy if you think your price increase will be temporary. You can easily remove the fee when the need for it is over.  In today’s climate, you could add a “temporary cost of goods” fee. If and when prices come down, the fee can be removed.

8. Add Improvements:  Customers are more willing to accept a price increase if it’s accompanied by improvements to your product or service. Better quality fabric in the clothing you manufacture, new menu items in your restaurant, or even new packaging for your product can help justify a price increase.

9. Offer Discounts to Cancel Out the Price Increase: When you raise prices, you may lose very price-conscious customers. To keep some of them, raise your prices but offer occasional discounts and deals that bring prices down to their original levels. While frugal customers will use these discounts, less frugal customers probably won’t bother, so you’ll still get plenty of people paying the full price while keeping your bargain shoppers happy.

10. Target a Different Customer Base:  If you need to raise prices drastically, you may need to go after a new, more affluent customer base. Even if your price increase is modest, expanding your target market a bit to more upscale customers or businesses with bigger budgets can be a smart way to offset the number of customers you may lose.

11. Raise Prices Gradually: If you want to lessen the blow of a price increase, you might want to consider raising your prices gradually. This way there won’t be a shock caused by a sudden big change. Caution: The downside to this is that you will be raising prices more than once.

12. Prepare for a Backlash:  You can’t keep all of your customers happy, and when you raise prices, you’re bound to upset some of them. Prepare your employees to deal with this and make sure they can explain why you’re increasing prices