Many companies like to start at lower price points than their competitors when they first begin rolling out their products or services. This is completely normal, but it’s often a tactic that stops you from achieving the levels of profitability you want later on down the line.
Of course, your customers will (or should) understand that prices will change eventually. But that doesn’t mean they will be happy about it, and it could even mean they go looking elsewhere for a cheaper deal.
Raising your prices is often a balancing act between getting what you need and keeping your customers happy. So how do you go about increasing prices without scaring anyone off?
Honesty is the best policy.
Particularly if you’re a B2B company, being upfront with your customers is essential if you’re looking to increase price levels. Just sticking an extra zero on the end of your invoice and hoping they don’t notice won’t wash and raising prices in this way may lose you more profits in disappearing clients than the price increase ever would have.
If you’re providing a service to someone, you should always keep them informed that future orders may cost most than they’re used to so they can alter their budgets and expectations. Make sure you do this as early as possible to give them time to get used to the idea and prepare themselves in advance.
Some customers may, understandably, wish to shop around for a cheaper deal elsewhere. This is to be expected. But as long as your products and services are good – and you have a great relationship with your clients – the more loyal ones will still probably want to stick around.
Learn your lines
It may sound odd but having a script in place when it comes to breaking the news of your price changes will make the process a lot easier for you.
Whether you choose to inform your clients via email or with a telephone call, make sure you have a script or template to use to explain that prices have increased and why. Before starting, you might wish to bounce the speech off a friend, colleague, or your Maple accountant to make sure you come across the right way.
This is one of those situations where you’ll want to break the news gently. No client wants to hear that they’re going to have to part with more money, so making the value of your products, your reasons, and how much you appreciate the customer’s understanding known will help you to justify the change of price.
Should a client contact you to complain, your script will also help you to remain consistent. It may also be wise to have certain deals on hand to offer those particularly unhappy with the change.
No, this is not entirely counter-productive to your goal of raising prices. When you announce your price increase, you can expect a few people to be unhappy about it.
By giving your existing customers a few weeks or months at a lower rate is a sign of good faith before the actual increase, you can help ease your customers into the new cost to keep them on your side. This helps to avoid a knee-jerk reaction to the sudden change like switching providers.
Little by little
If you’re not interested in keeping prices low for a while to let your clients adjust, gradually raising your prices a little at a time will have the same effect – while bringing in more profit per sale for you in the meantime.
Bumping your price up 10% in one day would frighten away many. But 1% here and 2% there sounds a lot more reasonable, doesn’t it?
Raising prices over a set number of months or years will be a lot less daunting to your clients, which will likely mean they stay with you. They still won’t be all too happy with the change, but they also won’t necessarily stop paying as long as this is in manageable increments.
Increase your value too
Don’t think of this as a price hike – more of an obligatory upgrade. Your customers will be much less likely to resist your change of prices if the product or service they receive is also improved (as long as their budgets allow it).
People like to feel like they’re getting more for their money, so it may be worth spending time working out how you can increase the value of your services to match your new price list.
Something as simple as selling items as bundles could make the world of difference. You can still increase your prices, but when customers see they are getting more in the deal, they may overlook the price change and be happy to pay it.
Speak to your Maple accountant
Whether you’re looking to increase your prices to expand your business, get through a dip in your cashflow, or simply to pocket more of your profits, speak to your Maple accountant.
Contact us today for support and advice by emailing email@example.com or call 01332 207 336