Tips for increasing prices: "How can you raise prices without endangering your business?"

In the business world, nothing is certain but change. One of the most challenging changes for entrepreneurs is raising prices. Every business owner struggles with this, and for good reason. Raising prices too high can result in losing customers, while not increasing prices can make it difficult to sustain the business in the long run.

"How can you raise prices without endangering your business?" In this article, we'll share some of our best tips and tricks to help you increase your prices successfully.

Option 1: Bundle your services

Bundling your services is a clever way to increase prices without raising the cost of a single service. Bundling gives the customer the impression of getting a better deal for the price. You can bundle services in different ways, such as offering package deals or monthly recurring services. For example, if you own a hair salon, you can create a package deal for hair coloring, styling, and trimming. The package deal should be priced at a premium over the total cost of the individual services, but customers will be more likely to go for it because of the perceived value.

Option 2: Add value to your product

One of the things customers want most is value. Adding value to your product is a great way to justify increasing the price. You can provide additional services, upgrades, or add-ons as part of your main offering. For example, if you are a consultant, you could offer a session with a personalized planner after coaching. Your customers will appreciate the free add-ons, and you can use them to support price increases.

Option 3: Increase your prices gradually

The best way to raise your prices is gradually. Instead of drastically increasing your prices, make small increments over time to avoid shocking your customers. This gradual approach will help you assess the impact on your business revenue and prevent customer loss. Start by raising prices on select products and monitor customer reactions before making further adjustments.

Always remember: Justify the price increase

Finally, it is crucial to justify any price increases. Customers are more likely to accept a higher price if they understand the reasoning behind it. Here is a list of most typical reasons of price increase and examples how to justify them to the customer, you can pick one or several. 
 

Inflation Adjustments:

• Explanation: Inflation increases the cost of goods and services over time. Adjusting prices to reflect inflation helps maintain profit margins.
• For example Consumer Price Index (CPI) can be used to calculate the rate of inflation and justify corresponding price increases.

Increased Cost of Raw Materials:

• Explanation: If the cost of raw materials rises, the end product's price may need to be adjusted to maintain profitability.
• Commodity price indices or supplier invoices can provide evidence of increased costs.

Labor Cost Increases:

• Explanation: Wage increases, either due to minimum wage laws or competitive labor markets, can justify higher prices.
• Labor market reports or labour index can be used as a data to back up and to calculate the price increase.

Enhanced Product Features:

• Explanation: Adding new features or improving product quality can justify a higher price point.
• Product comparison charts highlighting new features and benefits can be used to visualize and highlight the value to the customer

Supply Chain Disruptions:

• Explanation: Events like natural disasters, geopolitical issues, or pandemics can disrupt supply chains, increasing costs.
• Supply chain analysis and impact reports or suitable index should be used to justify the price increase.

Increased Operational Costs:

• Explanation: Rising costs for utilities, rent, or other operational expenses necessitate price adjustments.
• Financial statements showing increased overhead costs should be used to calculate the increase. 

Market Demand:

• Explanation: High demand for a product can justify a price increase, especially if supply is limited.
• Market demand analysis and sales data are used to define the new price position.

Regulatory Changes:

• Explanation: New regulations may require compliance costs, which can be offset by raising prices.
• Regulatory impact assessments and compliance cost reports.

Improved Customer Service:

• Explanation: Investing in better customer service, such as extended support hours or additional service channels, can justify a price increase.
• Customer service metrics and improvement plans can be shown as prove to the customer, for example faster order handling time results in faster delivery that benefits the customer.

As a business owner, raising prices can be an uncomfortable task. However, the tips mentioned above can help you achieve a successful price increase without alienating your customers. You can bundle your services, add value to your product, and increase your prices gradually. Always make sure you are honest about the benefits your customers will get from the price increase, and they will be happy to stick around.

Learn more about the importance of the communication of the price increase on our article: 

"Justifying price increases: Balancing business needs with customer trust"

The most important thing to remember is that when the value of your business increases, so should the price!