How to appropriately raise prices without losing customers?CustomersRaising prices can be difficult for small business owners. Why? It can drive customers away, and it’s not something that they can afford to do. However, a price hike is also inevitable because of the cost of doing business changes as well.
If you’re a small business owner, a price increase is something you have to get used to. To help you through the process, here are a few techniques you can use to raise prices without losing your customers.
How to appropriately raise prices without losing customers
How can we raise the price of the product or service that we provide without making the public angry so that this step comes very smoothly and diminish it neither the owner of the company nor the customer and this need can be achieved through the following steps:
Be honest and explain why
The best way to raise prices without losing customers is to inform them ahead of time and explain why. Whether you’re raising prices because of inflation or that your business costs have increased, your customers need to know. Be truthful about your reason and make sure it’s justifiable.
A 25 percent price increase, for instance, can be difficult to explain if the price of petrol has stayed the same and the inflation is only at 1.5 percent.
Remember: trust is an important part of commerce–it’s why your customers conduct business with you. If customers feel that you’re not being honest, you could lose them in a price increase.
While the honest approach is certainly commendable, it’s not a guarantee that you would retain all your customers. Consider giving them an incentive to remain customers in the form of added value, like perhaps a new feature or longer warranty period.
Adding value to your product or services gives you a good reason to raise your prices, provided that what you include doesn’t negate the additional revenue you expect to get; this defeats the idea of a price increase in the first place.
As a branding bonus, giving even more value to your customers’ money differentiates you from the competition.
So for instance, if you’re reselling personal computers, you can:
Provide customers a free Windows reinstall to keep their machines running smoothly.
Throw in a DVD that gives customers detailed step-by-step instructions on how to tweak and upgrade their machine.
What’s great about these perks is that they won’t cost you much in terms of time or money, so you get more revenue when you increase your prices.
Introduce new products/services
Another approach is to launch an entirely new product at a higher price and discontinue the existing lower-priced range. As with the previous approach, see to it that your new offering actually provides more value so that customers (especially those who regularly bought the now-discontinued products) would be willing to pay for it.
Raise the price of individual items in bundles
One way to raise prices without disgruntling customers is to put together a bundle of similar products and/or services, and then increase the price on certain items (but not all) included in the bundle. Using the reseller example earlier, you can sell a computer gaming bundle and:
Raise the price of its microprocessor and graphics card.
Include a subwoofer and increase its price as well.
Consumers believe bundled products and/or services offer better value for money, and it’s true for the most part, but they don’t know how much individual elements in the bundle cost. This gives you a bit of wriggle room in your markup, but don’t overdo it; you may end up charging too much.
Offer several price options
There will always be customers who won’t be happy with any price increase. You can, however, ease their displeasure by providing them lower-cost options so that they can avoid your higher-priced products if they wish.
If you sell your products in bundled packages, introduce a variant with fewer contents. Because of the lower volume, it would be cheaper compared to your larger bundles, but it should have a higher price per unit. Your customers would be happy to purchase the smaller, cheaper bundle, but your profit margins for it would be higher.
You can also reduce the volume while keeping the same price. This means you spend less on materials, allowing you to earn a bit more. More often than not, this is the approach used by businesses that sell commodities.
Charge by project
If you offer a service, it’s likely for you to become better and more efficient with it as time passes, which means you use up less time to do what you do. But if you sell your services by the hour, you will end up earning less. To get around this problem, think about charging your customers by project instead. Doing this leads to shorter turnaround time, additional projects, and more income.
Use new prices on new customers
You can raise rates and avoid negative reactions by limiting the price hike to new customers only. That way, your existing clientele won’t have to endure a price increase and you get your much-needed revenue boost.
There is a risk, however, that potential customers will see your lower rates when they do their research. This means you’ll have to update your marketing materials.
Don’t give early payment discounts
There are establishments that offer early payment discounts to customers who–as the term suggests–pay their accounts promptly. For example, some businesses give a 2 percent discount to customers who settle their outstanding balance within a week. This approach may improve your cash flow, but if you refrain from giving the discount, you can also use it to boost your profits.
Some customers may bristle if you don’t give them a discount, but if you honestly explain (see above) your situation, it’s much more palatable than a price increase.
how to raise prices without losing customers?
One of the important steps that any company passes so that it can grow and grow is to increase the prices of its products or services that it provides because any institution depends on its ability to make a profit, and this need will not happen unless it succeeds in providing a high-quality product or service at an appropriate price.
1- Provide new services when raising the price of a product or service:
Try to have new services or products by offering them to the public when you come to take the step of raising prices because it will reduce a significant percentage of the negative impact of the price increase so that a message will be sent to customers that in a greater value you will be able to pay for the new price and therefore most of them will understand this increase in the framework of balance between value and price. But this is not in the category would prefer focusing on increasing the price and will shift the step of providing higher value at a greater price to a point of contention.
2- Resizing the product while keeping the price:
Increasing the profit margin of the corporation does not necessarily mean increasing the price because in many times it is possible that you change the size of the product so that it is smaller with no change in the price, and this is a solution that a lot of restaurants or companies that work in the field of health and cosmetics will resort to.
3- Provide a group of products or services together:
In the impression that exists for most customers, that they will take better offers when they buy a group of products together, even if you do not know the cost of each product alone, so that will be one of the proposed solutions is that you sell a group of products with each other or a product with complementary services in a way that encourages The customer is to buy and convince him that he will take real value against the extra money he pays.
4- Show different levels of prices:
Use a good, very good, and excellent strategy that cellphone, aviation, hotel, and mobile companies use to offer the same product with simple modifications in its capabilities that are reflected in the price of each category in it because it gives customers the freedom to choose the most appropriate version and price of the product at the same time You are guaranteed to make a good profit, but we must ensure that the price differential does not exist between the different categories of the same product in order to cause confusion among the different customers.
5- Choosing the Right Time:
It is very important that you choose the right time to raise the price of your product or service because this will make a very difference in the way people receive this increase, meaning that you are taking into account the stage that your project goes through, for example, it is at any stage of growth, and in any sales cycle.
You also need to make sure that the timing is right for your clients by answering questions de: What is the status of my existing clients? How many regular clients do I have with me now? How many of them can you classify as having total loyalty to you? And to what extent can your customers appreciate the product you offer them? This is all to ensure that you are in a good position in the market and that you do not risk the future of your project when you take this step.
6- Gradually raising prices:
Sometimes it is better that you apply the price increase gradually over a specific period of time, and this needs to let you know the reaction of customers to successive increases, and this is a system that is usually applied by companies that depend on providing services to the public and need to succeed with different customers, especially when periodic increases are reasonable.
7- Last your loyal customers by increasing the prices two months before:
There is no one who loves to be surprised by the increase in prices because it is very important that you give an idea to your loyal and important customers that you will take this step two months earlier so that they have enough time that they put the new price within their budget.
8- Applying the new price to new customers only:
One of the options that some projects resort to is that they apply price increases to new customers, which is to reward customers who have full loyalty to their product or service.
In the end, we want to make sure that the step of raising prices in any project in general and in small projects, in particular, is not an easy step and it is accompanied by a decrease in the number of clients, but it is possible to implement simple procedures that pass in a way that satisfies the owners of projects and clients.