Ask SCORE About: The Delicate Art of Raising Prices
Here are 5 tips for increasing prices without inspiring rage.
1. Tell the truth.
More and more customers are willing to pay a bit extra for products or services they deem worth the cost. Clothing retailer Everlane, for instance, enjoys massive success among millennial consumers by promoting its commitment to using sustainable fabrics and ethical factories. Everlane can charge more than competitors for its clothing because it’s transparent about the worthy reasons for the higher costs. Customers will notice a price change—but are more likely to accept the change if they know it means a better standard of living for your workers.
2. Do it gradually.
A common tactic to raise prices without alienating loyal customers is to raise prices for new customers only. Amazon is giving current Prime members until June to renew their memberships at the $99 annual rate. After that, they’ll pay $119 just like new members. Ultimately, make it your long-term goal to have all customers paying the higher price.
3. Consider timing.
If you’ve just had a wave of customer complaints or gotten a bad review that went viral, it’s probably not time to increase prices. Test the waters by doing some customer surveys to confirm they value what you offer and are happy. If you get a lot of negative feedback, make some changes before raising prices.
4. Use add-ons to boost prices.
Last time you bought a piece of electronic equipment, were you offered an extended warranty or service contract, batteries, or some accessory to go with your purchase? Small items can add up, making add-on products or services a great way to increase your income. Restaurants offer “extras” like avocado on a sandwich for an extra cost. You can also keep the price of your core services or products steady and raise the prices of add-ons. Restaurant customers are more likely to notice if entrée prices go up than if beverage prices rise.
5. Say goodbye to products, services or customers that aren’t profitable.
Although you’re not raising prices, the end result is the same. Monitor your financials, and keep tabs on which products and services have the lowest profit margins. Unless they’re loss leaders, cutting out these low-margin items makes your business more profitable focusing on the high-margin parts of your business.
Do the same with customers. If you have high-maintenance, low-margin customers, it’s time to raise their prices—or cut them loose.