Price increase moves in a business can be done without pain

Ahmed Al Akber outlines his four-step strategy to increase your prices without losing customers.

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Let’s face it, your prices must increase at some point or another. You can’t hold on to the same price forever – an increase is just as inevitable as your own costs increasing.

But the thought of losing customers is what sometimes holds us back from making the decision, or delays it to the point that we are put in a corner. However, there are ways to raise prices that can greatly reduce the risk of losing your customers, and in some cases, even strengthen the relationships you have with them:

1. Make the price increase a win-win situation

If you sell to retailers, for example, could you make your new price an opportunity for them to make an even higher margin when they sell your product on to consumers? That would make the price increase attractive. You could also add extra features to the product or service that make its perceived value justify the higher price such as more marketing support to retailers to help them push your products in their stores or offering better payment terms on larger orders. Both these moves take thoughtful communication, but can be positioned as a benefit to everyone. Which brings me to my next point.

2. Communicate, communicate, communicate

Never assume that your customers will just “get” that your prices have increased unless you tell them. The best way to do this is to let them know you really appreciate them, and to give them enough notice that you are increasing prices. That way there are no surprises. Highlighting the reason why –higher supplier costs, market evolution, or increased skills and knowledge that justify the price increase to customers are examples – will make your customers aware of the thinking behind the decision.

3. Monitor the market

Watch to see if the competition react to your price increase. Do they follow suit or stay where they are? If they don’t budge, then you might need to continue to add as much extra value as you can to justify your price increase until they do – better credit terms, enhanced features and service, and improved marketing activities are some examples. If they do proceed with their own price increase, then you have less to worry about.

4. Never say sorry

You do not need to be apologetic for increasing your prices – this is how business is done. As your products and services develop, they should be worth more. Once you have made the change in price and things have calmed down, move on. If you have proven your worth through strong communication and making it a win-win situation, then your customers will remain loyal.

I once worked with a major food manufacturer that sold to retailers and executed this four-step strategy very effectively. They let the retailers know about any price increase well in advance of it being implemented, communicating the news officially in a personalised letter. It told the retailers the reason behind the increase, what the new prices were going to be and how they would positively affect retailers’ margins. Plus it detailed what marketing support they would provide as added value to retailers.

With margins being a key concern for retailers, the food company went the extra mile by communicating the new margins and how they were now more favourable than the competitors’. Hand-held presenter boards were used by the sales team that showed the new pricing structure before and after the price increase, with a comparison of competitors’ margins as well.

This simple technique highlighted the added benefit that the new prices offered, and made absorbing them more agreeable to retailers as they stood to make more money.

Communication to the retailers’ customers was also considered, with specific marketing material implemented along with special gifts that gave consumers extra value for larger purchases.

Carefully monitoring the market, the competition followed almost immediately. This almost came as a relief to the food company that the rest of the market was following.

Don’t hold back from what could be a very profitable move. If done well, you can keep your client base and make far more revenue and profit with a well-executed price increase.

Ahmed Al Akber is the author of Smart Marketing and the managing director of Ack Solutions, a revenue growth firm based in Dubai