The most important consideration once you have decided to raise prices is ensuring you communicate with your customers so they are not surprised. Customers would more likely be upset by a lack of communication than by the price increase itself.
Here are best practices for rolling out increased pricing:
- Let your customers know when you’re increasing prices, especially when you are doing so as a result of increased costs related to the product or service you deliver. There are exceptions to this, especially if you are in a retail or restaurant environment where your prices are publicly listed, and you may not have the opportunity to communicate beforehand, or it may just not make sense to tell people on the front end. However, do make sure that your team is ready to explain why the prices went up when regular customers are sure to ask.
- Start increasing your prices with new customers. This suggestion is more applicable to businesses that give quotes and proposals for products and services provided. New customers don’t always have a reference point on what your old prices were, and you have the opportunity to set expectations early on in the sales process.
- Make sure that you are providing services and products that are worth the additional price. If your customer doesn’t value what you are providing, your customer service sucks, or you aren’t doing what you said you were going to do, then increasing your prices will most likely hurt your business. However, if your customers are valuing what you do and know you are going to take awesome care of them, they will be much more likely to accept price increases without complaining. When you have a strong reputation for service and generating results, raising your prices for new customers also becomes easier (see #2).
- Provide alternative options. By giving your customers a second or third option at different price points, you may find that some will make the jump even if it means a decreased level of service. However, simply having a choice maybe be enough for them to stick with what you’ve been providing. You may also find that there are some value-added options that you can include that are beneficial to your customers but that don’t add additional cost to the bottom line.
The bottom line
Don’t let the fear of raising prices stop you. The fear will be dispelled by shining the proverbial flashlights on your customers and your business. While most of us don’t voluntarily go out and unnecessarily spend more money on things that we want or need, we also understand when prices go up, especially when it’s for a service or a product that we appreciate and when the price increase has been communicated. Being honest with yourself and your customers is the light in the dark room that your business needs!
Raising your prices is just one way to increase your small business profits. We created a free guide with seven ways to improve your bottom line. Download the free guide here, and you’ll be on your way to a more profitable year. You can also get in touch with our team if you would like to talk more about how we can help you run a more profitable business.