How to Raise Prices (If You’re Feeling Guilty)
The dinner table no-gos: religion, politics, money. But the greatest of these is money. When the subject of raising prices comes up, business owners can get very Midwestern (Permanent Equity is based in Columbia, Missouri, so we know what we’re talking about here). There can be a lot of reluctance to rock a good relationship by asking for more, especially in B2B businesses.
While some business owners raise prices like clockwork, others put off increases because it’s uncomfortable, because they don’t want to break promises to their most loyal customers, and because they’re worried about customers becoming angry, complaining, or leaving.
But there are good reasons to raise prices, and there are better and worse ways to go about doing it.
Why?
At the moment we’re writing this piece, the story of the day is inflation. Many of the businesses we talk to and work with have or are contemplating raising prices due to the increased costs they’ve already absorbed. In some ways, this is the easier pill to swallow when preparing to charge your customers more. At some point, it’s raise prices or close up shop.
Why else?
Beyond inflationary realities, there are other reasons to raise prices.
The value of your product has grown. If you’ve added new features, increased the quality of your product, upped service levels, or otherwise increased the value your customers are getting from you, it’s time to charge more.
The market has changed (or you understand it better).
You want to change your position in the market.
What to say?
First, you actually have to say, “We’re increasing prices.” Confusing communications that dance around a price increase are less than useless and leave the door open for distrust and discontent.
“We’re increasing prices just because” isn’t enough. It’s what comes after the “because” that’s key to preserving relationships and trust. Even when it’s hard (especially when it’s hard), over-communicate, acknowledging the impact of the increase and reinforcing the value you’re providing.
Underscore the value add: If possible, explain that you’re raising prices because you’re adding more features or upping the value of your products. Of course, this only works if it’s actually true, but the more you can frame your price increase around the benefits to your customers, the better.
It pays to be honest: If you’re raising prices because of inflation, use the narrative around inflation. If you’ve held off as long as you could and can highlight how long you’ve been able to keep prices the same, despite mounting pressures (from rising materials prices, increased service costs, higher rents, whatever), let your customers know. And, give your customers some credit – prices are going up everywhere.
How to say it?
You don’t want to blindside people – or have them think you’re trying to pull a fast one. So timing matters – the earlier you can communicate a price increase the better. It builds goodwill with your customers.
The nitty gritty of getting people in the loop is important, too. There’s the baseline communication to all your current customers explaining the increase. Again, this communication should be clear and concise. And high touch advanced warning or quick follow ups with individual key customers are critical too.
And, if it’s appropriate, go public. While this step is conditional on your business, a blog post, video, or other public content on your website reiterating and explaining the price increase means that not only is the information widely available, but your customers won’t think the hike is personal to them.
Prices regularly rise. Just look at the price history of a McDonalds menu for reference. Don’t let guilt cause you to put off the inevitable at the expense of your business.
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