Author | Aram Anthony
Businesses are feeling pinched from all sides, from supply chain issues to ongoing labor shortages to continuing inflation. If you’re a business owner, how do you offset rising costs and maintain margins without alienating your customers? In short, how do you maintain your business’s health? Because your ability to raise prices to cover increased costs is greatly diminished if your customer base shrinks significantly.
Communicate value
We’ve assembled some helpful business tips and advice you can use to soften the impact of higher prices on your customers. But keep in mind, even with this business advice, making the decision to pass along higher costs to consumers is not a decision to be made lightly. Customers are generally more forgiving of price increases when they feel that it is backed by a strong value proposition. That’s why, when raising prices, it is essential to clearly communicate the value customers will receive in return. Justify the price increase by highlighting the benefits, improvements, or additional features of your product or service.
Gradual price adjustments
Like the fabled frog in a pot of water, consumers will tolerate gradual increases in price but may hop out if you raise prices too quickly or too much. Instead of implementing a sudden and significant price hike, consider gradually increasing prices over time. Incremental price adjustments can be less disruptive and help maintain customer loyalty.
Use “Introductory Pricing” or “Limited-time Price”
Using a label like “Introductory Pricing” or “Limited-time Price” tells consumers that your current price is temporary and holds the door open for later price increases.
Let customers lock-in current pricing
If your product or service evolves in iterations, each more feature- and benefit-laden than the last, be sure to allow enough lead time and give customers the opportunity to extend their commitment to the current price before having to pay the new one.
Be open about coming price increases
One way to avoid having your customers flee from sticker shock is to allow a certain level of transparency in your customer communications. Letting your customers know your situation and the reasons behind a price increase allows them to adjust their budgets. In addition, it lets you stay ahead of any competitors who might seek to control the narrative.
Level up your customer experience
There’s a reason people pay so much more to fly first class. The first-class experience is all about making the customer feel appreciated. Providing your customers with a first-class level experience adds value to your products and your brand. And it gives your customers another reason to willingly absorb your price hike.
Offer enhancements that add value
Adding enhancements or additional services to your product that coincide with the price increase makes the increases easier to swallow for many customers, especially when they feel like they’re getting more value for their money.
Make switching a barrier
If customers can easily switch to a competitor at little or no cost, their loyalty can evaporate quickly, and so can your ability to successfully increase your prices. But, put a meaningful gate in their way and the strength of your position improves greatly.
Upsell, upsell, upsell
The deeper the engagement you can build with your customers, the more likely they are to remain loyal. One of the most effective ways to deepen customer relationships is by listening to them, identifying their pain points, and then adding compelling, value-added products or services that address those pain points.