Business owners eat and breathe numbers from monitoring prices to evaluating profits. If you have been regularly tracking your numerical data, you would know when it’s time to raise prices. Often businesses raise prices not only to increase profits and perceived value but also to beat inflation and increase the budget for the improvement of services.
To many entrepreneurs, the raising of prices poses a concern for fear of how customers will react. After all, once clients feel accustomed to a certain price point, it is hard to accept change. It is normal for you to feel afraid of losing customers, but you must get it done when data calls for it. Take note; it is possible to increase your prices without losing a large part of your client base. Here is everything you need to know about raising your prices without alienating your clients.
1. Study what your competitors are doing
One very important thing to monitor if you decide to change your pricing is the movement of your competitors. As they say, keep your friends close and enemies closer. Keeping an eye on your fiercest competitors will let you know of the change in prices in the overall industry so that you, too, can keep up.
Moreover, if you notice that you are the only one hiking up the price, you can strategize how to better position your brand and products. Then, perhaps, you can offer something out of the ordinary to truly justify the price increase, while grabbing the market share for your niche.
2. Be straightforward and honest with your clients
As tempting as it is to sneakily raise prices, do not do it! The last thing a customer would want is to be slammed with a bill that costs far more than what they were expecting. You don’t want them to notice massive price hikes upon checkout. If you take this route, your clients will be put off, and they will surely never return.
Instead, be honest and straightforward. For best results, let customers know four to six months in advance that your company will increase prices. Most of all, make sure to explain your reason for doing so.
You don’t need to get into specifics; just mention the reason in a general manner, like stating the increase in the price of raw materials or your commitment to improving customer service. Letting the customer know of your intentions for raising prices would make them less hostile to the price change.
3. Be confident with your decision
Be confident in your new set of prices! Showing hesitation or apologizing for the price increase indicates that you have little faith in your product or service. This is not a good sign from a buyer’s perspective. Additionally, showing nervousness might incite your clients to bargain and negotiate.
Instead of feeling sorry for the price change, focus on the added benefits this will bring to your customers, like more product offerings or improved services. When you make your decision grounded on data, you don’t have any reason to be nervous. For this reason, you need accurate bookkeeping and accounting practices to ensure you can make the right forecasts and projections.
4. Don’t forget that it’s okay to lose some, win some
In business, it is important to know that there are different kinds of customers, the most important of whom are your regulars and value-driven clients. Some buyers who are price-driven might respond to your price increase by no longer supporting your brand. If that happens, take it in stride. It is okay.
Eventually, you will find yourself with more customers along with the old ones who have been with you from the start. If you give a valid reason for hiking the price, loyal clients will find a reason to stay. Besides, if you have a lot of customer benefits that come with the price hike, you provide enough justification for your decision to do so.
5. Make the price hike at the right time
Timing is crucial when it comes to raising prices. You want to do so when your customers are satisfied with the quality of goods and services they are receiving. When they’ve been so used to your brand and cannot live without it, they will keep on seeking your offerings no matter the price. It means you’ve become an indispensable part of their lives.
Thus, make sure to be diligent in planning out your price increase. Do your part in proving your brand is worth it in the months leading up to the effective date of your price increase. On top of that, review your numbers well to make sure that you are making the right operational decision. This is a major move that cannot be done flippantly.
If you need help, you can seek out professional accounting and auditing services. Our professional team of CPAs can help look at your books to check if a price hike is indeed in order. We can offer advice on what areas need improvement, especially if you feel like there are inefficiencies that result in high expenses. Call us for a free 30-minute consultation.