Have you ever wondered how to raise your prices without losing customers?
Every small business owner struggles during the early stages between wanting to ensure your customers are happy, but also wanting to make a healthy profit.
Do you find yourself holding back on raising your prices out of fear that you’re going to anger or alienate existing or new customers?
You may have already built up some great relationships, and you’re worried that raising your rates might jeopardise these.
But it’s important to remember you shouldn’t feel guilty about wanting to make money because a business doesn’t make sense unless it does. You’ve got budgets to meet, staff to pay, and cost prices are continually increasing. So, here are some ways to raise your prices and keep your customers.
Over Deliver First
Your first priority when starting a business is to ensure your product or service is solving a problem that people have, and providing them with huge amounts of value. Focus on impressing your customers with what you have to offer, and demonstrating the value of it for at least 3 months before raising your prices.
If you manage to create something that people truly love, and your customers feel like it’s making a significant difference in their life, they’ll often be happy to pay you a little more later down the line.
If No One Questions Your Rates, They’re Too Low
Most businesses don’t know what to charge when they first start out, and usually end up under-pricing themselves to either attract customers or clients; or simply because they don’t know any better.
As a general rule of thumb, if someone doesn’t try and negotiate with you, and no one is mentioning that your rates are on the high side, they’re probably too low. Pay attention to these flags when they arise.
Find Out If You’re Actually Providing Value To Your Customers
The only way to find out the real impact your business is having on people is to actually ask them.
Do you have a customer service department, or a way of collecting feedback from your customers, so that you can see what they really have to say about your product or service?
Without this information, you’d be blindly raising your prices, and potentially upsetting the customers you already have.
Your business might be changing people’s lives, and people might have nothing but wonderful things to say about you; but you’ll never know unless you ask them.
And if your business is getting one stellar review after another, then price accordingly.
Time It Right
If you’ve recently had a string of bad reviews or customer complaints, then it’s probably not the best time to think about a price increase. Take the time and measures needed to resolve this before you do anything else.
However, if most of your customers are extremely satisfied, and are telling you you’re doing a great job in providing them with an amazing product or service, then could be a great time to raise your prices without losing customers.
Most people don’t make purchases based solely on cost; instead, they make choices based on what they believe to be worth the cost.
For example, many consumers are willing to pay more for clothing or food that has been made in a sustainable and ethical way and doesn’t harm people or the planet.
When companies explain this to their customer, they’re more likely to accept the price increase because they know what it’s for and they feel as though their purchase is having a positive ripple effect in the world.
So whether your price increase is so you can use a better supplier or factory, hire more staff, or give your current staff a pay rise – don’t try and hide it. Be honest and tell your customers about it.
Thank Your Customers
If you’re going to raise your prices, take this as an opportunity to thank your current customers for being with you up to this point. Show your appreciation for their business, and express that you sincerely hope they’ll stick with you for the future.
Good customer service is highly underrated by many businesses and can be the difference between a one-time customer and a customer for life.
Give An Entry Price Option
If your fear raising your prices might make you unaffordable to some of your present customers, it’s worth introducing a lower-priced option. This should offer slightly less value than the higher-priced offering, but could also be less expensive than what the customer is already paying.
This gives your customers the choice of paying more for increased value or saving money by choosing the cheaper option.
Increase Prices Gradually
Some businesses choose to only increase their prices for new customers and honour the lower price for existing customers so as not to alienate them. But this can upset new customers if they find out they’re paying more than others for the same product; plus, your goal should be to get everyone paying the higher price in the long run.
Amazon Prime handled their price increase well by giving existing Prime members the chance to renew their membership for the same annual rate of $99 until June, after which the price would increase to $119 the same price everyone was paying.
Increase Your Value
If customers can see they’re getting more than they were before, they’re more likely to accept a price increase. Take some time to think about what you could offer that would be of little to no extra cost to you. For example, a free e-book.
Improvements to your product or service will usually be well-received by existing and new customers – after all, they want to see you grow and evolve as a business just like you do.
Bundle Products or Services
Another way to soften the blow of raising your prices is to bundle your products or services at a discounted rate compared to the individual prices. For example, a restaurant could offer a three-course set menu price during lunch or dinner on slower business days. A spa could offer a massage and a facial together.
Have a think about what you could bundle together that would keep your current customers happy, while enticing new ones.
The best approach to raising your prices is to ensure you’re not only thinking about your current costs but anticipating cost increases that may happen over the next two years. The last thing any business owner wants is to go through the planning and executing of hiking up your prices, and then realize you have to do it all over again five months later!
Raising your prices often comes with a fear of losing existing customers, but as you can see above there are many ways to avoid this and make your customers happier in the long run.