How To Increase Your Prices And Get Away With It
There are many different reasons why prices need to rise: labour costs, materials and fluctuations in customer demand are all key factors here. As time goes by different brands and services can raise process to exploit market fluctuations but whatever your specific set of circumstances, communicating a price rise to a customer is never easy.
Many companies, and even entire industries, routinely raise prices without ever telling customers. This manifests itself in reducing quantity (smaller packages of the item for the same price) but maintaining the price. This increases the per-unit amount paid by shoppers but keeps the more visible package price unchanged. Alternatively, brands may decide to reduce trade promotions and discounted coupons thereby raising prices indirectly.
When such strategies cannot work or be tried the manager is faced with having to communicate to customers that prices have increased before the next Invoice is sent out. When performed badly and with a strong degree of clumsiness customer complaints will rise, social media becomes filled with angry customers venting their annoyance, complaints increase and there is the risk of customers buying elsewhere. Even worse, you may have to cancel the price increase just to keep them!
To avoid these problems the business should consider the following strategies to deal with the issue:
Call the action a price increase and be honest about it!
By not being honest about the increase, perhaps calling it an adjustment or alteration, customer perceptions are likely to be enraged and the message attracts an air of dishonesty. Attempts to mask or camouflage prices increases rarely work and inevitably create hostility and anger. It is far more helpful for the organisation to be honest and transparent to maintain the (hopefully already positive) relationship with the customer.
Authenticity and honesty matter to customers, especially for bad news. By trying to deflect the real message customers become suspicious, become more vigilant and voice strong critical objections. Furthermore, many customers will feel patronised and levels of indignation will rise to a point that serious reputational damage is very likely.
It is always therefore best to be totally honest and just set out the price increase in a transparent way.
Explain the reasons for the price increase clearly.
Communicating a price increase can be a nerve-wracking time. Many managers see this as an unpleasant task to be completed with a minimum of fuss and attention, making it seemingly easier that a full explanation for fear of the reaction it will create. Poor communication just baffles and confuses the very people that you want to keep on-side and certainly not alienate.
It is the size of the price increase and the perceived fairness of the reason for the increase are critical success factors here.
Link the price increase to the things that customers value.
The most effective price increase communications are those that convey a vivid and fully rational reason why the price is increasing and how it will deliver consistent, or improved, value for the customer. Price increases that bring with them greater benefits are more likely to be received fairly and explains how and why the changes are needed.
This need only be a short piece of narrative, but it must provide a credible explanation that resonates with customers, putting them at the centre of the price increase story linking the price increase to some substantial added customer value. Above all else the business needs to show that it understands how customers derive value from the product or service and how this is factored into the pricing process.
One very powerful argument is telling customers that the brand can only continue to provide the current level of benefits if it raises the price and is choosing to do so rather than degrade the product’s quality is one that all customers would recognise. This reinforces yours and the brand’s values to the customer.
In summary managers should approach the unpleasant task of communicating a price increase to customers with the same degree of sincerity, attention to detail, and customer focus that they bring to other brand-building projects like introducing new features or extending product lines.
Making customers that feel like valued partners of an authentic brand with their interests in mind must be the overriding consideration at this difficult time.
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