THE COST of living is at an all-time high just now, so as a business owner how can you deliver a price increase announcement for your customers? Here, Simon Tushingham Jones provides key tips on how to do just that, as well as explaining an effective way in which to increase costs without losing valuable customers.
Gearing up to raise your prices may leave you feeling apprehensive. You don’t want to alienate your customers and risk churn. However, if you make sure you’re clear and open about the upcoming changes then you’ll reduce the prospect of loyal customers looking for greener pastures.
So, what exactly is a price increase announcement? It’s usually a letter or an e-mail and will do exactly as you would expect (ie inform your customers that your pricing will change).
There are many factors that indicate it’s time to make a price increase announcement to customers. These include elements such as inflation, fluctuating business costs and general business growth (among other things). Let’s dive into some of those elements and look at how they can help you in deciding if it’s time to up those prices.
Let’s say that your prices haven’t gone up in a while. This is a simple, but realistic approach to move for a price increase. Customers often visit one business because they’re used to the way that business works. That could be in regard to the services, the staff and, of course, the pricing structure. That isn’t a good reason for keeping your pricing the same because, don’t forget, a price increase can bring in a lot of new customers and strengthen your brand name.
When they’re looking for a product or service, customers will often choose to shop around. Depending on what’s offered, and the costs involved, having a cheaper rate can turn customers away. Customers want to feel like they’re realising value for money, but also that the service they’re receiving is top tier. Paying that little bit extra will showcase your quality.
As a business owner, you don’t want to be left footing the bill for any shortcomings with your expenses. As time goes on, the costs for goods and materials will increase, fuel prices may rise and your overheads will fluctuate. Your prices need to reflect the changing landscape, so sending out a price increase notice to customers based on your own costs increasing is perfectly feasible. Keep an eye on any reporting you do on a regular basis for fluctuations in your margins. This way, you can make adjustments to your pricing before it becomes a little more serious.
Looking around the market
Check out the competition. What services are they offering? Can you see a similarity? Do your competitors’ customers react positively to their pricing?
Have a look around to see what your competitors are charging and read their customers’ thoughts about pricing from their online reviews. This will help hugely when deciding to increase pricing. The ‘sweet spot’ is aiming to price competitively, while also maintaining the value of your services.
Let’s assume customers are noticing you and your brand name is spreading like wildfire. Demand for business is a fantastic reason to strike while the iron is hot. In the beginning, it’s common to start with a low pricing strategy to attract and build your customer base. However, as demand for your services increases, it’s important to stay competitive and help your bottom line. Pricing too low will only harm your business in the long run, as well as stifling the industry.
Having a competitive pricing strategy based on your own services and value is one side of the coin. The other is targeted pricing based on local competition. Your competitors will likely be checking out your business, so make sure you check out who’s in the area and think about adjusting your pricing based on similarities in service or the products they offer.
By raising your prices to align with other similar businesses in the area, you can target competitors’ customers as well. It’s a great way of killing two birds with one stone, so to speak. You’re bringing in new business and, in turn, increasing your bottom line with a price increase.
How often have you subscribed to a monthly service, like Spotify or Netflix, and after some time been notified of a price increase? Just as you expect to receive clear communication about price changes, so do customers. As a business owner you want to be transparent with your customers and build a reputation of which you can be proud. This should include organising a price increase announcement to customers well ahead of when the price increase will actually take place.
There’s never going to be a scenario wherein customers are happy to see a price increase, but you can soften the blow a little by giving them plenty of warning. Giving proper notice builds your brand credibility and lowers the risk of customers looking for a cheaper deal elsewhere.
Delivering the notice
This next part may sound like we’re teaching you how to boil the kettle, but there are many different methods of communication you can use to tell customers about a price increase. You can employ social media channels including Facebook, Twitter or Instagram. Alternatively, you can send correspondence by post or e-mail. Then there’s the option of sending a text message to customers who have left their contact details with your business.
When you’re dealing with a price increase announcement to customers, it’s up to you how you wish to send that notification. The main focus should be making sure everyone is aware of the changes, that you’re clear and transparent about the details and there’s going to be little disruption for your customers.
Next up are a few tips that will aid you when sending a price increase announcement to customers and minimise the risk of losing business. These include adding a personal touch, providing ongoing support, transparency and highlighting the value of your services.
When notifying customers of a price increase, make sure that you’ve considered all the options that are contributing towards the reason behind this decision. It’ll depend on the type of business you run, the services you’re offering and the reason behind the price increase. You should try not to raise costs for customers more than once per year. You also don’t want to miscalculate business costs and lose profit despite the price increase. Ensure each department within the business is aware of the upcoming changes given any confusion internally that’s passed on to your customers is not a great look. It can have a negative impact on your customers’ opinions of the business.
You have to be clear, transparent and honest about the price increase. Let customers know the reasons behind the decision. Your customers are less likely to stray if they understand the motives behind the price increase. Publishing a price increase notice to customers on your website is hugely beneficial as well, as any new prospects are aware of the upcoming changes.
Put simply, the more information you provide, the more opportunity customers have to educate – and make an informed decision for – themselves. Transparency and clarity will build trust and decrease frustration.
Personalise the announcement
You don’t need to go overboard when it comes to personalising communications. There’s no need to ask about Mrs Johnson’s tropical fish collection in your e-mail. However, depending on the type of business and customer base, you want to make the process as smooth as possible for your customers. Don’t fall into the trap of sending a blanket e-mail as one size will not necessarily fit all when it comes to pricing.
If you deliver different types of services, then the price increase may affect different clusters of customers. This is where you can personalise to their needs. By sending specific pricing details so the customers don’t have to trawl through additional documents, you streamline the process and highlight the important details for them. You can also personalise their service, such as giving them access to an additional service bracket for the same cost or keeping them on their current pricing tier for a little longer as this will build trust and loyalty.
With a loyalty scheme, you can soften the blow of a price increase with limited time offers. For example, you can offer a price freeze if the customer pays for a service up front within a specified time frame, such that customers pay the existing rate rather than the higher cost once the price increase takes effect. Your customer will benefit from paying a familiar, lower rate and you’ll bring money into the business faster. Just bear in mind that if you’re running reports at a later date around profitability, this will have an impact on your figures.
Demonstrating value for money is crucial. Customers don’t want to feel like they’re being taken for a ride. Reassure your customers of the reasons behind the price increase, whether that be due to higher operating costs, the business expanding (and therefore more hiring costs) or material costs increasing. It’s important to be open and demonstrate your business value to the customer. Despite the cost increase, the customer will still be receiving the same quality, if not better, service. More revenue coming into the business means you can focus on injecting that back into improving existing services.
Your customers will likely be in one of two camps: they embrace change with open arms or they absolutely detest it and it fills them with anxiety. Whichever camp your customers fall into, you want to make it as easy as possible for them to adjust to the price increase.
Combining the tips we’ve already shared here will help towards this goal. In addition, make sure there is a Frequently Asked Questions (FAQs) page ready for your customers as it’s likely they will have questions. Ensure that everyone within the business is aware of the price increase and equipped with the knowledge and resources to accommodate the changes. This will avoid any confusion or miscommunication being construed outside of the business. That will solidify customer trust should they call in for further clarification. The all-too-familiar scenario where someone calls a business and is then constantly passed between different people is one you want to avoid.
Make sure there are contact details within the announcement. There will always be customers who want to reach out and chat about the upcoming changes and this can help put them at ease. The last thing customers want is to have to scroll through multiple pages to find an e-mail address or phone number, so make sure the process is easy for them. This will build trust and shows you’re open to discussing these types of business decisions transparently.
By offering the opportunity for customers to speak with a manager or executive within the business, their concerns are heard. It’ll strengthen the customer's confidence with your business, leaving them less likely to jump ship.
Further, adding the FAQs around these changes will help reduce a large influx of calls or chats to the Customer Services Department.
Hands up who enjoys receiving a price increase notification for a monthly bill a week before the change? Treat your customers exactly how you wish to be treated. Provide plenty of notice when sending out a price increase announcement to customers. Customers may have to re-assess their budget or consider alternative options. By giving them one to two months’ advance notice, you’re affording them that breathing room. They may want to go over the Terms and Conditions and have time to weigh up their options before making a decision. More than anything, it’s just common courtesy.
Let’s face it, in the current economic climate with price increases more common than ever, increases will not come as a huge shock for many. As much as customers don’t enjoy learning about a price increase, it’s something that’s very common practice within business. As long as you’ve followed our previous tips on how best to write a price increase announcement to customers then there’s no reason to apologise.
You have to be firm in your decision with the price increase and reflect that back to your customers. If your customers are happy with the service you provide then it’ll take a little more than a price hike for them to leave.
Say ‘Thank You’
That leads us over to the opposite end of the scale. It’s important to let your customers know their value to the business. Make sure you thank them for their continued support. It’s not just your employees that keep the cogs turning: your customers are as much a part of your business as anyone.
If your customers continue to use your services then you can continue to grow the business. However, that is highly dependent on the relationship you build with them. Even if there are customers who have to stop using your services, show them your appreciation for their support. You never know who may come knocking at your door again in the future.
In summary, sending out a price increase notice to customers can be a nerve-wracking experience. There are lots of things you’re likely thinking about in the planning stages to ensure it runs smoothly. If you follow the tips outlined, you’ll have a much higher chance of keeping those customer relationships you’ve worked so hard to build in the first place.
Simon Tushingham Jones is Vice-President of Mid-Market Sales at simPRO Software
*Further information is available online at www.simprogroup,com