It is a common incident that happens to every business sooner or later- that awkward moment when you have to talk to the clients about the increase of cost of your product or services in order to stay profitable.
However, does it really have to be awkward? Not if you plan this ahead and communicate well with your customers.
There are lots of reasons you may want to increase prices: supplier price hikes, inflation, growing service demands and other factors that need cost adjustments to maintain or better service levels.
If you aren’t ready, announcing those price hikes to consumers could be hard or even cause some clients to call it quits. You can produce a better result if you communicate frequently, prove your value and avoid surprising them with sudden increases.
How you handle the cost increase conversation will depend on why it’s happening in the first place.
Communicate ahead off any raise: Your suppliers may raise their costs, which will explain an increase in the part of the business. Notify consumers as soon you know that a product price hike is on the way, and let them know you’ll have to pass that along in order to continue offering that product or service.
However, you can’t just raise costs each time your suppliers do it can have a fatal effect on your business. Clients aren’t going to put up with constant increases. Evaluate possible increases, and make certain you price for sustainable profits over the years to come.
Survey the competition:
Check whether your prices are in line with similar service providers. If they’re not, create a plan to slowly bring your prices in line with the market.
Tie cost raises to your value proposition
Chances are you will add new products and services over time, and that will need price hikes to maintain your margins. Describe the new value you’re offering and how the new products/features will affect the ROI or total cost. Consumers will be more likely to accept these increases if they know they’re getting improved services or additional features.
Communicate your value regularly
Schedule a reasonable number of check-in calls every year, starting off with a Quarterly Business Review with every client to assess how things are going. Clients will remember that you took the action, and they will appreciate the gesture. This continuous conversation with customers about the product and services you’re offering & changes in the marketplace helps to guarantee they are aware of new products and features, new security problems you’re monitoring, and other activities. Then, when it’s time to speak about a price hike, they will already know what you’ve been doing to help their business succeed.
Offer additional options
You can further introduce price rises by creating a new service or product packages. If needed, make certain a lower-cost option is still accessible, but emphasise that they can get greater value with the more costly package. Finally, you will find that maximum customers care more about the value of what they are getting than the price.
Remember, your clients are also business owners, and they have possibly been in the same situation as you when it comes to periodically increasing prices. Think about why you are raising prices, communicate those reasons openly and positively, and make certain you’ve laid the right groundwork by constantly communicating with your clients about the value you offer.
If you’ve ticked these boxes, periodic rate adjustments can be added with minimum drama and without distancing your clients.