Are you ready to raise your prices, but you’re worried about losing customers? The way you raise your prices affects your customer pool. For small business owners, it’s essential to know how to raise prices without losing customers.
How to raise prices without losing customers
You might know how to price a product, but raising your prices can get tricky. There’s always the chance of losing a few customers when you raise prices. But, you can prevent losing customers by raising your prices with these methods:
1. Explain your price changes honestly
Though it may seem like spreading bad news, be upfront with your customers about price changes. The earlier you tell customers that you are raising prices, the better. Often, customers will value your honesty.
Telling customers about price increases early helps them prepare. Customers can budget for the changes before they owe you money.
But, if you are not open about price changes, new prices could confuse and upset customers. Customers like to know what to expect when making a purchase. Learning about new prices at the point of sale might cause you to lose customers.
Give your customers an explanation of why you are raising prices. Keep your explanation positive. Instead of talking about your business expenses going up, explain the price raises in a way that benefits customers. For example, you might have raised prices because you started using higher-quality materials in your products.
Create a plan to tell customers about price raises using several forms of communication. For example, you might speak to customers, hang signs, send emails, or post on social media. Carry out your communication plan in advance and answer your customers’ questions.
2. Add value to your products and services
As a small business owner, you should add value each time you raise the price of your products or services. The extra value might be a new feature on a product. Or, the value might be that you have become more skilled at a service over time.
Give the customers a reason for your methods of pricing that directly benefits them. If customers see value in your products and services, new prices might be more welcomed.
For example, you own a music supply store. You raise your price for guitar repairs, but you give customers a free set of strings with each repair. The extra value of the strings makes your new price more acceptable.
3. Inform employees about price changes
Make sure your employees understand price changes before you raise prices in your business. Also, be certain your employees are comfortable with explaining the price changes to customers.
You don’t want your employees to be confused about your prices in front of customers. Customers may think your business is disorganized.
Before you raise prices, hold a meeting with your employees. Tell employees what the prices will be raised to, and why your price increase strategy needs to take effect in the first place. Teach employees how to handle your customers’ questions about the new prices.
4. Charge per project, not per hour
The longer you operate your business, the more efficiently you work. As your skill levels increase, so should your prices. When you charge per hour, you actually penalize yourself for working more proficiently. As you get more efficient at your work, it takes you fewer hours to finish a job.
Instead of charging per hour, charge customers per project. When you quote a price, outline what services you will provide and your credentials. In other words, show the customer the value of your work.
Charging per project can be beneficial for you and your customers. Typically, customers want their projects finished faster.
Switching to per project is a more subtle price increase strategy than just increasing a bottom line price. And, you can make more money than if you charged per hour.
For example, you charge $40 per hour to paint a room. It takes you three hours to finish the project, so you make $120.
But if you had charged per project, you might have made more money. Let’s say for the size of the project you charge $160. You would have to work an extra hour to make the same amount as your per project price.
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This article is updated from its original publication date of June 23, 2016.This is not intended as legal advice; for more information, please click here.