How to raise prices without losing customers

How to Raise Prices Without Losing Customers

Increasing your prices can be tricky at any time, and in today’s age of internet shopping it is very easy for customers to shop around.

As a small business owner it is important to regularly review your prices, especially if there is a key event like:

  • A product or service is not selling
  • Your costs change
  • You introduce a new product or service
  • You introduce product enhancements
  • Your competitors change their price or introduce a new product

Factors to consider

When setting or changing prices it is important to understand the following factors

  • What are your competitors charging? If you are charging more, why, what differentiates your product or service?
  • Offer multiple options – so have a basic product and then for additional fees customers can purchase add-ons.
  • Understand your costs – there is no point in setting your price if you are going to make a loss on your product or service. Its ok to make a loss on a few products to get your customers in the door, but overall the aim of the game is to make a profit!
  • Understand where your product is in the lifecycle – is it a new or premium product in high demand?
  • Understand how much the customer is prepared to pay – do some market research. Are your target customers bargain hunters or premium shoppers?

Strategies for increasing your price

There is no one magic formula for increasing prices without upsetting customers. Unfortunately, a lot of customers are price driven.  It is important to change your prices with care. Here are some things to think about when increasing prices:

  • Increasing your prices by a little to test what works. Studies have shown that price increases of up to 5% have little to no impact on customer retention
  • Let your customers know about the price rise and why. Don’t forget to update your website and your sales team!
  • Promote the value of your product or service – your point of difference
  • Test price increases on the client’s you don’t mind losing so much!

Example

To calculate the impact of say a price increase or increase in the number of products you sell to each customer, use this interactive calculator: