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How to raise prices without losing customers

How to raise prices without losing customers

9
min read

Nobody likes price hikes – not you, not us, certainly not your customers. 

From a business perspective, we understand the concern. Talking about price increases can feel like walking on eggshells as you ponder whether customers you've worked so hard to win over might be tempted to explore more wallet-friendly alternatives. 

In today's competitive marketplace, where customers can switch brands with a click, navigating a price increase can be quite the balancing act. But fear not, it's all about clear, empathetic communication. 

We're here to guide you through that process so you can raise prices without raising eyebrows.

<a href="#raise-prices" class="anchor-link">Why do companies raise prices?</a>

<a href="#easing-concern" class="anchor-link">Easing the concern around raising prices</a>

<a href="#price-without-losing" class="anchor-link">How to raise your prices without losing customers</a>

  • <a href="#good-reason" class="anchor-link">Have a good reason</a>
  • <a href="#price-increase" class="anchor-link">Carefully choose your price increase</a>
  • <a href="#advance-notice" class="anchor-link">Give customers advance notice</a>
  • <a href="#be-concise" class="anchor-link">Be concise</a>
  • <a href="#no-apology" class="anchor-link">Don’t apologize</a>

<a href="#streak-email" class="anchor-link">Communicating price increases over email with Streak</a>

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Why do companies raise prices?

When they learn about price increases, consumers’ biggest question is, “why?”. There’s no single answer, though. Businesses change their prices for many reasons that they may or may not communicate to customers. 

Some of the common reasons companies raise prices include:

  • Increased costs: This is one of the most common reasons. If the cost of raw materials, labor, or overhead (like rent or utilities) goes up, a business may need to increase its prices to maintain its profit margins.
  • Inflation: Similar to increased costs that are specific to a business, as the general cost of living increases, businesses often need to raise their prices to keep up.
  • Increased demand: If a product or service is in high demand, a business may raise prices. This can help balance the demand with the company's ability to supply the product or service.
  • Brand positioning: Sometimes, businesses raise prices as a strategic move to position their brand as a high-end or luxury option.
  • Quality improvements: If a business has improved the quality of its products or services or is trying to match changing standards in their industries, it may raise prices to reflect the increased value.
  • Regulatory requirements: Increases in taxes or changes in regulations can increase the cost of doing business, leading to higher prices.

Having a clear understanding of why you’re raising your prices will help you communicate changes with your customers in an honest and effective way.

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Easing the concern around raising prices

Many business leaders hesitate to raise prices—even when it’s in the best interest of their companies—because they fear backlash from customers who might be tempted to explore more wallet-friendly alternatives. 

But is that concern entirely warranted?

Sure, no one likes to hear that they have to pay more for products or services, so some customers are bound to be upset. In fact, a portion may even try to find a cheaper alternative. But if you approach your price increase the right way, those customers will be in the minority. 

Try flipping the script and think about the last time you learned that a product or service you use was going up in price. Were you furious? Did you immediately stop shopping with that company and run to one of its competitors? Probably not. As consumers, a lot of us understand that pricing isn’t set in stone due to the reasons listed above. The important part is that consumers understand why a price raise is happening and believe that it’s either necessary or reflecting an increase in value.

Don’t let the fear of angering some customers prevent you from implementing necessary changes in your business, including price increases. Most companies change their prices at some point—it’s all about communicating that price increase effectively to keep backlash to a minimum. 

With a clear strategy for raising prices, you’ll be prepared to break the news and implement the price change without losing customers. If you get a few negative reactions, which you undoubtedly will, you’ll also be better equipped to handle them as they come. 

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How to raise your prices without losing customers

It’s true that raising prices introduces you to the risk of losing some customers who are very price-sensitive. However, when done correctly, you may be surprised by how smoothly the whole thing goes over.

The key to raising prices without losing many customers is communicating this change well. 

Here’s how to do it.

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Have a good reason

Many companies are currently increasing their prices “because they can." Businesses see other brands responding to inflation and increased costs and they want a piece of the pie. 

While no one can stop you from raising prices just because you want to make more money, that’s not the message you want to send to consumers. Try to increase prices only when you have a good and legitimate reason. Customers will be much more willing to accept price increases when you can back them and clearly explain the “why” behind the decision.

a price raise email from Nocs Provisions binocular company

Nocs Provisions, a popular binocular company, cites well-known supply chain challenges and also reiterates the value provided in free shipping, service, and warranties to explain its price increase. By reinforcing that they have their customers’ backs long term, they’re building the relationship even during a price increase.

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Carefully choose your price increase

So you’ve decided a price increase is necessary, but there’s still the question of how much to increase the cost of your product or service. 

You don’t want to have to increase prices again right after this initial price raise, so you need to make sure it’s a meaningful increase for your business, but you also don’t want to send your customers into shock. Again - it’s a delicate balance.

To start, consider all the factors that are causing you to raise prices and research other companies in the industry. For example: 

  • Cost of Goods and Services: This is the fundamental starting point. All businesses should be covering their costs, including raw materials, labor, operations, and overheads. The new price should account for any increases in these costs.
  • Profit Margins: Consider the profit margin you want to achieve. The new price needs to allow you to make a profit, while still offering value at a reasonable price to your customer.
  • Market Conditions: Assess the economic climate and the specific conditions of your industry. Is demand for the product or service rising? Is there significant competition? These factors can influence pricing decisions.
  • Customer Perception and Demand: The new price should reflect the perceived value of the product or service to customers. Too high, and it may deter customers; too low, and it might undermine the product’s perceived quality. Also, remember that price can influence demand – if the price is too high, demand might drop, and vice versa.
  • Competitor Pricing: Understanding what competitors charge for similar products or services can provide a benchmark for your own pricing.
  • Pricing Strategy: The pricing approach can vary based on the overall business strategy. Some businesses might adopt a cost-plus strategy (adding a standard markup to the cost of goods), while others might follow value-based pricing (pricing products based on the value they deliver to customers).

With pricing, it’s best to have a clear and strategic approach, versus relying on a “gut feeling” or thinking that a certain number “just sounds right.” Take the time to understand the factors causing your price increase and how much you should charge based on each of them. 

While you don’t need to break down your balance sheet with customers, being able to communicate the big picture reasons behind price changes will go a long way to maintain your customer loyalty.

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Give customers advance notice

Suddenly springing a price increase on your customers out of nowhere is a great way to damage their trust in your business. Give your customers plenty of advance notice before the price change so they can adjust. Some may use that time to research alternative solutions, but that risk is worth keeping your customers’ trust. Include the date of the price change in your alert as well as any deadlines to make changes to their service plan or orders if possible. 

a detailed price raise email from Webflow

In their price increase email, Webflow provides plenty of advance notice of the price increase and even offers a grace period for customers to purchase at legacy prices. The grace period gives customers more time to adjust and encourages them to stick with this company. 

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Be concise

Your message alerting customers about the price increase doesn’t need to go into the nitty-gritty details about your business. Lengthy explanations won’t make your customers any happier, but they will make your business look somewhat defensive. 

Stick to the core details about your new pricing structure, such as the new prices and when they take effect. If you want to add more, consider assuring customers that you’ll continue delivering the products or services they know and love and possibly even improve them. 

Here’s a general guideline for what to include in price increase emails:

  • Subject line: Make it clear but not alarming. A subject like "Update on our pricing" is informative without causing panic.
  • Gratitude: Start by expressing appreciation for their business and loyalty. This acknowledges the relationship you've built with them.
  • Straightforward announcement: Early in the email, clearly state that prices are increasing. Being direct is better than beating around the bush.
  • Reason for increase: Explain why you're increasing prices. Whether it's due to increased costs, improved features, or inflation, transparency helps customers understand and accept the change.
  • Details of the increase: Specify what exactly is changing and when the change will take effect. This could include a comparison of old and new prices, if appropriate.
  • Value reiteration: Highlight the value and quality the customer will continue to receive, despite the increase. This can help reassure them that your product or service is worth the higher price.
  • Contact information: Provide a way for customers to get in touch if they have questions or concerns. This could be a customer service email, phone number, or a link to schedule a call.
  • Appreciation and reassurance: Close the email on a positive note, expressing appreciation for the customer's understanding and reaffirming your commitment to providing top-quality products or services.

an email from Strava about raising prices

Strava missed a few key elements when they announced their price increase. They had a great subject line (not pictured) of “Our prices are changing - here’s why”, but the body of the email says very little about the price change. In fact, it doesn’t even tell the recipient if they’re going to see a price raise or when they're raising prices. 

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Don’t apologize

You may be tempted to apologize for increasing your prices. Many businesses include a brief apology with the notice of their price increase, but that’s unnecessary. In fact, it may indicate to your customers that there’s wiggle room in your new prices, which you want to avoid. Instead, simply inform customers of the change and leave it at that.  

A price increase email from a coworking space

This co-working space recently raised prices and included important information concisely, but apologetically. The language, while it gets the message across, should be more definitive and confident. 

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Communicating price increases over email with Streak

Businesses that make price increase announcements often use email to do so since it’s an efficient and affordable method of communicating at scale. 

The main issue with sending the announcement over email is that it can come off as impersonal and cold. It doesn’t have to be that way, though. Using a mail merge tool in Gmail, you can send personalized mass emails to alert customers that you’re changing your prices. 

use Streak mail merge to send personalized price increase emails from your Gmail inbox

Once you select your recipients, write your price increase message using the tips above. Then, add variables like the contact’s name, their position/title, or the products/services they purchase from your company. Streak will automatically fill in these fields with personalized information for each contact. 

When your recipients get the price increase email, the message will contain personalized details about them. This small touch can make all the difference in helping your customers accept that you’re raising prices. 

Raise prices with confidence by sending out transparent and personalized communication with Streak mail merge. 

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