How to Announce a Price Increase Without Losing Sales
Your price isn’t always something you can control. Big-picture economic shifts in trade, material costs, and demand can sometimes force you to increase prices rather than compromise on quality. For example, 53.2% of retailers say that recent tariffs on Chinese imports will hurt their sales, and that they’ll need to pass their increased costs along to consumers. This scenario can have an outsize effect on small-to-midsize retailers and brands who want to deliver a top tier product and experience, but don’t have the scale to absorb increases in price caused by market forces. What should you do if you have to raise the costs of your offerings, how do you help customers accept this change, and what can you do to ensure your sales stay up?
We’ve compiled a list of strategies for you to employ along every step of the way to make the most of a price increase—and even potentially end up driving more sales in the process!
Strategies for Managing a Price Increase
Be Transparent – Your customers will be more understanding if you take the time to explain why you’re introducing a change. Give them the wider context and explain what went into this difficult decision. You aren’t just driving up the cost to squeeze them, there are practical concerns that mean a price jump is necessary to continue to meet their expectations. Communicating what’s going on in a straightforward way in advance means your customers will have time to prepare and will feel valued and respected.
Timing Is Everything – Raising prices isn’t necessarily a fun prospect, but the best time to do so is when you’re sure customers are satisfied with what you sell and what you do. If a new product launch is having hiccups or your shipping has been taking longer than usual, it’s probably best to wait a bit before you announce that prices are about to jump. Always make sure that you’re communicating with customers beforehand and demonstrating value in the lead up to a price increase.
Announce the Change – There’s no benefit in springing bad news on your customers, but there are big incentives to letting them know about a price increase beforehand. Letting them know means you can start the process of increasing acceptance for the change, rather than maximizing your chances of giving them sticker shock. Doing so can even lead to a bump in sales before the price increase goes into effect, as customers who were considering your product decide to buy while the price is still low.
Offer a Bonus – Your customers will be more willing to pay a higher price if they feel like they’re getting some other benefit for parting with their hard-earned cash—and this benefit may not necessarily be financial. Using higher-quality materials, widening your product range, starting a loyalty program, or even just changing your packaging can go hand-in-hand with a bump in price to soften the blow. You can announce the new bonus along with the price hike, letting your customers know at the same time that they will be getting even more than they were before.
Consider Cost-Saving Measures – Increasing the price of your product doesn’t have to necessarily mean changing the number on the price tag. Depending on what you’re selling, you can increase the size or volume of your current offerings along with price. For example, you can offer your product in a smaller amount for the original price but at a higher unit cost, retaining the original unit cost for customers who buy in bulk.
Leverage Financing – If prices are getting higher, offering alternative financing can be a good way to help customers manage larger orders without having to worry about paying for everything all at once, or putting the entire balance on their credit card. That’s why point of sale financing is rapidly gaining ground—over the last six years, banks have lost 12 percentage points of market share to companies that offer POS financing, while those same solutions have gained 33 percentage points. If prices are getting higher, it never hurts to make it easier to buy.
Anticipate Backlash – Unfortunately, it’s unavoidable—there is going to be a subset of customers who aren’t happy about a price increase, and who will be vocal about the change. That’s okay. Some may defect to a cheaper alternative, but if you are ready to respond and make your value proposition clear, you’ll hold on to more customers. If the price was the only thing keeping them loyal to your brand, chances are they weren’t that loyal in the first place.
A price increase doesn’t have to be catastrophic. It doesn’t have to be a point of anxiety or dread. Most businesses will have to consider it at some point. Instead, it can be a valuable inflection point. It’s a time to really consider what your brand stands for and the value it can provide to your customers. Why do they chose to buy from you in the first place? Having a good answer to that question is key for any successful brand. Those that do have an answer have no reason to fear increasing their prices.