Increasing prices is never an easy thing to do, especially when it seems like almost everything around you is going up in price as well. But when prices go up, it’s important to consider your own pricing of products and services in response to inflation.
Many businesses are experiencing an increase in material and labour costs, as well as customer demand, which is resulting in unprecedented shortages in some industries. In order to maintain the same level of service or product quality, a price increase may be necessary.
If you do need to raise prices, how can you make the transition as smooth as possible for your customers? Here are a few tips from our Accounting and Business Advisory team to help you prepare customers for price increases from suppliers down to consumers.
The best way to inform your customers about your price increase is to communicate transparently with them. Send them an email or letter that contains information about the reason for the price increase and how much it will affect each of their products.
Be sure to keep this communication short and simple, so you don't bore your customers. Remember, the last thing you want is for your customers to get annoyed with you. Loyalty and trust are two things that are hard to earn but easily lost.
Before you increase the price of your product, give customers ample notice by advertising the price increase. This will allow them some time to raise any questions they may have and have plenty of time to get used to it.
If you provide them with a date for the increase, let customers know they can still purchase your product at current prices for as long as stocks last.
With sufficient time to prepare for this change, you will be better placed to retain customers, as they will be better able to accept and adapt.
Customers can perceive value in different ways. To help customers understand the value that they are getting with your product or service, explain the value they will receive and your roadmap for the future.
While communicating price increases to customers, convey to them that you are committed to maintaining the same quality or upgrading the quality of the product or service.
It’s important to consider all the stakeholders in your business when communicating price increases – employees, customers and suppliers. Each department in your organisation should be informed about the price changes to help minimise impacts to their day-to-day operations.
For example, if your sourcing and purchasing departments are aware of the price increase, but your marketing department isn't, pricing information might not get updated in time, which can create confusion for your customers.
Customer loyalty is created when you provide great value in your product or service, and the customer experience stays consistently good.
Showing your customers that you appreciate their loyalty can make them more receptive to price increases. And it doesn’t have to be complex or expensive. Simply communicating a sense of gratitude and appreciation and being thankful for their understanding can help boost loyalty to your brand and increase customer satisfaction, which is one of the major key drivers to increasing revenue.
Price increases are an unfortunate but necessary reality during times of inflation. And to maintain profitability and keep up with rising costs, companies may need to periodically increase their prices.
The Crowe Tax Advisory team can help your business navigate what can be a difficult process, so you minimise any impacts to customer loyalty and purchasing behaviour. Contact us today for assistance.