Pricing Strategies – Raise Prices Without Losing Customers

Even when depleted profit margins and inadequate cash flow show the need to raise prices, many small businesses avoid raising prices they because they are afraid of losing customers.

It’s possible to raise prices without losing customers.

Most U.S. consumers know that a business must occasionally raise prices due to increases in cost of operations, supplies, payroll and other inputs. But however necessary, price increases have the potential to negatively impact sales, and may even cause customers to seek out lower cost alternatives.

Apart from eliminating popular products and services, few business decisions spark the fear of losing customers in a business owner’s mind than a price increase. Nevertheless, it is sometimes not only desirable but necessary for a business to raise prices in order to remain profitable, maintain adequate cash flow and produce the revenues it needs to grow.

Related Articles: 4 P’s of Marketing – 10 Ways to Price Products to Sell 

Price is one of the cornerstone 4 P’s of Marketing. We came up with 4 P’s of pricing to keep in mind when your business needs to raise prices to minimize the chance that you’ll lose customers in the process.

4 P’s of Pricing – Raise Prices Without Losing Customers

1. Give plenty of notice.

It’s not fun to talk about raising prices; in fact, it practically invites customer complaints and requests that a planned price increase be abandoned. However, springing a price increase on customers as a “surprise” may be far more damaging to your business.

2. Put it in a positive light.

Often price increases are needed to maintain healthy profit margins that allow a business to continue to provide a better customer experience than that offered by competitors, or even to make improvements to facilities or the level of quality the business can provide. When you decide to raise prices, be sure that you tell customers about the positive benefits they will receive as a result.

Another way to put a price increase into a positive light for your customers is to repackage your products or services in a way that helps them to see an increased value alongside an increase in spending. Examples of this could be bundled product or service options, free or reduced-price add-ons, or products or services that are re-vamped into a whole new form so as to avoid customer perception of price increase altogether.

3. Point to percentages.

If the percentage of a planned price increase is less than the percentage that your business’s costs have increased, that’s a percentage you can point to when communicating with your customers. In fact, if the percentage of your price increase is a considerably smaller number than that of increased costs, your customers may even be appreciative as they perceive you are not passing on all of the cost increases to them.

There are other percentages you can point to in order to avoid negative customer reactions when raising prices. When you raise prices, you have the opportunity to up-sell customers into higher-cost, higher-value packages. For instance, you can point to VIP, member or bulk purchase options that result in percentage of savings for your customers, or the percentage of savings they could enjoy by visiting more often or increasing the amount they purchase.

4. Phase it in over time.

Phasing in price increases over time, rather than all at once, can keep more customers in the fold as they have the opportunity to gradually adjust their budgets rather than experiencing a dramatic increase in spending all at once.

Rather than spring a price increase on your customers, cross your fingers and hope for the best, use these pricing strategy marketing ideas to raise prices without producing customer defections.

***

Maintaining adequate cash flow is important for every business, and nearly every business experiences an occasional cash flow challenge, even if you raise prices (or when a price increase isn’t an option). Our business financing alternatives could help your organization maintain more consistent cash flow or provide money during cyclical or seasonal downturns.

Feel free to contact us for a free, no obligation quote for business financing to find out whether our financing options could mitigate your cash flow challenges.