Are you in the position of raising prices of business services of products? Fifth Third Bank offers 5 key points to consider when raising business prices.
For most businesses, there comes a time when you have to raise your prices. The need usually stems from a combination of internal and external factors such as inflation, transportation costs, material costs, commodity prices, research and development costs and wage increases.
While you know you have to increase prices to stay competitive, you also know that most customers are not fond of paying more for the same item.
With all this in mind, here are some things to consider when looking to implement a price increase:
Planning: Internal Messaging Is Key
Before you make a pricing change, think through about what’s in it for your customers and vendors. Will they experience an improvement or enhancement to a product or service? Or is the price increase a necessity based on external factors, such as those noted above?
It's important to have an internal and external plan to message the increase, and to have responses ready for your customer satisfaction team. Before you communicate the change to your customers and vendors, make sure your entire company knows the reasoning behind the price increase. This helps to ensure that everyone is on-brand and on-message. Also, let the internal team know how the increase is going to be communicated - emails, signage, phone calls, etc. Whatever form the communication may take, work to help make sure the change is communicated in a clear way.
Don't Just Offer a Discount. Instead, Offer Value
Some companies have ‘trained’ their customers to wait for the sales email to land in their inbox. That means they can’t raise prices because they know their customers will just wait for the inevitable sale.
Instead, offer value to your customers. This could be a switch to more sustainable production and shipping policies or added transparency in the manufacturing process. More customers want to know the process behind a company’s products and are willing to pay a bit more for equitable practices—that's why it's so critical for your company to have a clear understanding of the why for your price increase, and to communicate that clearly.
Gather Customer Testimonials
Customers are a company’s best brand ambassadors. Their perception of your product and services can hold enormous influence as the buyers and users. You can affect your customers’ perception of you in a positive manner by understanding and meeting the needs of your customers combined with excellent customer service. This positive influence can be used to strengthen your market share, increase your competitive advantage and be used to support price increases. Getting your customers’ buy-in for a price increase via testimonials can help because they already have a positive perception of your brand and see the value of it.
Reward Those Who Stay
Consider offering rewards or a subscription model for your customers who remain loyal. For example, Panera recently enacted an unlimited coffee program with a monthly fee, in addition to its regular rewards program. Similarly, small businesses can enact loyalty programs with relative ease, whether that comes in the form of a punch card, points program, tiered loyalty program (the more you buy the more you save), or others.
Enact Your Communications Plan
Once you've determined your reasoning for the price increase, and communicated the plan internally, you'll then need to communicate it clearly and directly to your customers with enough time for them to process the message. This also gives you enough time to respond to questions and to use that information to better customize your messaging. Think of it as ongoing research.
It's also key to follow up with any questions you may receive from your customers and vendors as a result of your communications. This should be done as quickly as possible during the communications process.
Price increases affect more than just your company, and those who play a role in your success should know the what, why, when and how. Taking the steps to properly message it out will mean fewer lost customers. You may even gain some new, loyal customers who respect that you took the time to let them know.