How to Raise Prices Like a Boss: A Step-by-Step Guide
Few things drive fear into the heart of a business owner like raising prices. Getting clients is nearly impossible to begin with, so there’s a natural terror that the slightest twitch of a change in how you interact with them might send them running for Google to find somewhere else to buy your product.
And yet … inflation is real. Every. Single. Year. The electric bill goes up a few bucks, rent always increases, and you get little notices all the time letting you know about the latest UPS surcharge or Quickbooks upgrade requirement.
On average, prices for the things we buy increase 2-3% each year. That doesn’t sound like much until we realize that that means in a 10-year period, prices typically go up about 28%!
If you don’t raise your prices to match, your profitability goes down in inverse proportion. But if that still doesn’t convince you that it’s necessary to raise prices, read this article about the dread most business owners feel around this topic.
A Guide to Raising Prices
You know you need to raise prices, so how do you pull it off while keeping as many customers as possible? It’s easier than you might think, and if you’re able to take advantage of a few quirks of human nature, your customers will barely notice.
Step 1. Set a Date to Raise Prices
Your goal is to raise prices when people are naturally primed for change, and that time is the start of a new year. If you possibly can, slate your price increase to take place Jan. 1st. We are all primed for the new year to equal change, and people notice first of the year price increases less than they do at other times of the year. If your clients are under a contract, another good time to approach a price change is when the contract year ends.
Step 2. Set a Date to Notify
You’ll want to notify your clients of a price increase way in advance. Like, a full 90 days before the increase will take place. You might worry that this will give your client more time to start looking for a replacement, but the opposite is actually true — the more notice you give, the less likely someone is to shop around.
Sounds counterintuitive, but the reason can be chalked up to human nature: We all focus on what needs to get done right now, and most people only think two to four weeks ahead. Think about when you start shopping for birthday or holiday gifts. It’s right around that time frame, even though we know they’re coming up a full year in advance.
When people receive a price increase notice far in advance, they will think, “Well, that’s a long way off. I’ll put it aside for now.” And when the time actually comes, because we primed them with the information, the increase will have lost any shock value. As a result, they’re less likely to even notice that they’re now paying more.
Step 3. Write Your Notice
If you’ve established your brand voice, you know the tone your clients expect from you. When you write your price-increase notice, be sure to stick with the program. You can find numerous templates online for writing this document, but consider that just a start. No one knows your tone and voice like you do.
You may want to lead with a headline that speaks to your voice and tone. But as you get into the actual writing, be sure your notice includes these three things:
- State the price increase first thing at the top. And even if your brand is goofy, punny or smart-alecky, clarity beats cleverness: “On Jan. 1. of next year, we will be increasing our rate for services by 5%.”
- Tell your customers how the rate increase will help them receive better products or services. It may be as simple as “The prices of our organic ingredients have increased significantly, and this price increase is necessary so that we can continue to provide you with the high-quality products you expect.”
- Finally, appreciate them! End your letter with a heartfelt note of support and love for your client base: “We’re so grateful for your continued support, and we’re excited to continue this journey with you in the new year.”
Protip: Most failings in price increase history stem from the customer not actually knowing the price was going up and being quite angry when they discover more money coming out of their account than they expected.
Or
“We want to pay our employees a fair and living wage, and this increase will help us meet that pledge while keeping the extremely high standard for customer service you expect from our company.”
There is one big never for your letter: NEVER apologize for the price increase. Don’t say anything remotely close to “unfortunately we must …” or “we’re sorry to tell you …” Your company is a team effort between you and your clients. They want you to receive a fair price for providing them with a fair service, and to apologize is to imagine they’re mad at you for raising your rates. If a client is angry at your well-explained price increase, you’ll never be able to make them happy in the long run.
Step 4: Prepare Your Saves
Inevitably, someone will object to the price increase. For each one of those emails or DMs, you’ll want to have two prepared responses ready to go.
The first one should be some version of “Buy more now at the current price!” If it’s hours, widgets or haircuts, offer people the opportunity to stock up at your current price. This will keep them coming back and hopefully, by the time the stockpile runs out, they will have forgotten that the price went up and continue as happy clients.
The second option for saves is a reprieve for existing clients. This usually looks like, “OK, because you’ve been such a loyal client for so long, I will extend our current price another 90 days for you. How does that sound?”
Everybody loves to be given something special — to feel special — and this sort of effort will typically work as a salve, regardless of why your client is angry.
If you follow this step-by-step process year after year, you’ll be able to regularly and safely raise your rates and keep your clients. You may lose a couple along the way, but if someone breaks up with your business over a 3-5% price increase, then all they cared about was your price, not your unique value.
Those customers suck, and you don’t want them anyway.
#2: Tell your customers how the rate increase will help them receive better products or services.