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7 Things You Should Consider Before Increasing Your Prices

By November 7, 2018 No Comments
Hundred dollar bill divided into a bar graph increasing
Hundred dollar bill divided into a bar graph increasing

Keeping customers happy is crucial to longevity, but businesses can’t always continue offering the same products and services for the same price. As a business owner, there comes a time when you need to increase your prices to adjust to rising costs of materials and labor and assure continued profits. One of the biggest struggles businesses have is how to raise prices while retaining customers.

The secret to increasing rates while maintaining customer satisfaction is making sure you do the necessary work up front.

Before you decide to change pricing structures, here are seven things to consider and implement.

1. Calculate the true costs in running your business
One of the worst decisions a business can make is to increase prices by guessing what they should be. Guessing increases the chances a second price increase will follow the first in a short timeframe. It is essential that businesses take the time to review costs and project future costs, so you know exactly how much you need to increase prices.

2. Offer existing customers grandfathered pricing
Showing good faith by offering existing customers grandfathered pricing for a specific timeframe shows that you aren’t in the business solely for making money. You care about their well-being and want to give ample time to adjust their pricing strategy in preparation. Businesses will find that more customers are willing to stick it out by showing the business cares.

3. Understand what drives customers
A price increase won’t work if your ideal customers are driven solely by price. Take the time to gather data about what motivates customers to make a decision or establish a relationship with a customer.

4. Check out competitor pricing
While your goal is to set yourself apart from your competition, it is still important to understand what other businesses are charging for the same type of services. Review a handful of competitors pricing so you have a better understanding of the acceptable range and can see how you fit into the market.t you more in the long run.

5. Gather feedback on price changes
Gathering feedback on price changes helps you understand how customers will react once they go into effect. If during the research and testing phase, you learn that customers are more price-sensitive than previously assumed, businesses can restructure how they will release the change. Considering customer reactions is a crucial part of during every step of price changes.

6. Give customers plenty of notice
Whether customers are driven by cost or not, they are more likely to leave if you provide little notice about the increase. It is a good business practice to notify customers through a letter at least 30 days before the change takes effect. The message should also provide some insight into why the increase is necessary and the company’s continued efforts to make improvements for customers.

7. Understand what you want
Finally, businesses can’t properly raise prices without knowing what they or what type of business they want to be perceived as. This includes having a profit goal. When a business knows what they want to profit monthly, quarterly or yearly, they can increase prices accordingly the first time. It is also crucial to know how you want to position your brand. Do you want to be the most expensive or cheapest?