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How to Increase Your Prices Without Losing Customers

Economic headwinds are inevitably forcing businesses to consider upping their prices. But a price rise needn’t be all bad news to your customers. Delivered properly, it could be just another step in developing a long-term customer relationship.

Australia may no longer issue pennies, but when you tell your friends and family a recent purchase was “worth every penny,” they all know what you mean.

Everything we buy has to be justified. With personal items like clothing or books, we have to convince ourselves that it’s not going to put us behind with our regular expenses. It’s the same in companies where investing in a product or service requires an extensive business case to prove ROI.

Most of what we buy now costs a lot more than a couple of pennies, thanks to higher-than-usual inflation. Those same economic pressures may force your business to increase what your customers pay for your products and services. But won’t that risk seeing some customers walk away for good?

Make a price rise a bend in the road, not the end of the journey

While the increased cost of materials or a rise in operating expenses may make a price increase unavoidable, many customers are making tough financial decisions. Some may have already been re-evaluating where they spend, and a price increase could push them in the wrong direction. The latest State of the Connected Customer report found 71% of consumers switched brands at least once in the last year, and 66% of them did so because they could get a better deal. These are tough figures to contemplate when considering a price increase, but it needn’t be all bad news.

Communicating a price increase is, within any industry, a natural part of the long-term journey that makes up any customer experience.

When you began your relationship with your customer, winning them over meant they came to see the value of their experience as greater than the price they would pay.

Over time, the experience you’re delivering should continue to evolve so that the value continues to grow. This could involve deepening the personalisation you offer every time a customer engages with your business. 

It may also benefit from a greater demonstration of your company’s values and willingness to give back. The State of the Connected Customer report found customers are influenced to buy from a company for many other reasons besides price, including their environmental practices and their actions on racial injustices. Nearly nine in 10 expect companies to clearly state their values, but only half feel this is common practice — and they’re showing their dissatisfaction by walking. Sixty-six percent of customers stopped buying from a company whose values didn’t align with theirs. 

When the customer experience becomes richer, customers may become loyal to that experience and in turn, willing to pay more.

Four questions you need to ask

Part of what makes a price increase a particular challenge is that they tend to happen across the board, which requires a message that gets communicated to your entire customer base. Bear in mind that yours may not be the only message of this kind that lands in their inbox. You’ll not only need to strike the right note, but ensure you don’t seem to be simply one more company asking for more money.

As you review the message you’re sending, make sure you can answer the following four questions:

  1. Are customers being given sufficient notice?
  2. Is the price increase clearly defined?
  3. Does the rationale provide enough context for your price increase?
  4. Has the price increase message been positioned as part of an ongoing conversation?

When the customer experience becomes richer, customers may become loyal to that experience and in turn, willing to pay more.

1. Are customers being given sufficient notice?

Retailers who welcome customers into their physical stores or online don’t often need to spell out a price increase because shoppers may only visit and spend occasionally. For many other businesses, however, customers are investing via subscription services or contracts that have to be periodically renewed.

The earlier these customers can be notified, the more time they have to process the news and, if necessary, to reallocate their budgets. It also provides you more time as a business to respond to any questions or concerns, and to persuade them that sticking with you is the best course of action.

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2. Is the price increase clearly defined?

The effort to soften what can seem like a blow can lead companies to overload their messages with extraneous information or to try and couch the price increase in a way that makes it seem less than it really is.

Be transparent and get to the point in the first paragraph of your message. Don’t make them scroll down to find out the details. Instead of disguising the price increase by describing it as a percentage, get as specific as possible so they understand the actual difference in dollar value.

This kind of transparency speaks to the same desire customers have for the companies they deal with to be authentic and transparent in all ways — from clearly stating their values to how they gather and use personal data. Indeed, 74% of customers say communicating honestly and transparently is more important now than before the pandemic.

3. Does the rationale provide enough context for your price increase?

In an ideal world, your price increase could be part of a good news story, where you’re responding to customer feedback by launching more functionality to a product or complementary elements to an existing service. Even when that’s not the case, you need to make your reason for a price increase resonate.

Remind customers of the full experience you’re delivering. Help them see that a price increase will allow your business the ability to continue providing that experience consistently and with the same high level of quality — the emphasis on quality is particularly important given product quality is the second most common driver of brand defection

If relevant, you should connect the dots to larger forces, such as the economy, that are common across the market and that are out of any single person or organisation’s control.

The overriding theme of your message should be that you’ve looked at this price increase from your customer’s point of view and that it still makes sense for everyone involved.

4. Has the price increase message been positioned as part of an ongoing conversation?

There may be some people within your customer base who will proactively complain immediately following your message. While some customers will be happy to provide feedback via email or a chatbot, this might be an occasion when service agents need to spend more one-on-one time with customers. Automation-powered self-service portals and chatbots will allow straightforward enquiries to be efficiently addressed so agents can be available for more meaningful phone interactions that could help nurture loyalty in the face of a price increase. 

For example, multi-brand retailer and distributor True Alliance now handles more than 70% of customer inquiries through automated services like Live Chat during peak periods. This frees up customer service agents for more meaningful interactions. Service Cloud gives them a 360-degree view of the customer which has helped resolve case handling times by 22%. 

In the case of a price rise, this 360-degree customer view could help agents identify opportunities for more personalised responses to customer concerns. Do they have a history of loyalty around other products? Have they tapped into complementary services? Have the benefits of the product been adequately explained to them? This is just part of providing truly customer-centric service.

Other customers may not reach out — but they would benefit from additional information. Embed links to FAQ content about your pricing and its benefits. Consider how you can use content like video to bring these details to life in a more compelling way. 

Don’t be afraid of using surveys or other mechanisms to solicit more actionable feedback about how to improve your customer experience amid a price increase. There could be relatively inexpensive or smart ideas that come in, such as a request for more self-service tools, or changes in how information about your product and service information is presented across digital channels.

Your price increase is ultimately posing a question to your customers: is the experience they’re having with your brand going to be worth a few more pennies? Being direct, open and responsive to their reaction is the best way to retain their loyalty and ensure the long-term growth of your business.

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Salesforce Staff

The 360 Blog from Salesforce teaches readers how to improve work outcomes and professional relationships. Our content explores the mindset shifts, organizational hurdles, and people behind business evolution. We also cover the tactics, ethics, products, and thought leadership that make growth a meaningful and positive experience.

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