Hi folks!
Every week, I’m sharing a hands-on guide designed to help you tackle common small business challenges.
Today’s topic: how to raise prices without losing customers.
Before we start: This playbook comes from the Scalepath resource library, which is packed with over 50 playbooks, plus templates and expert calls to help you grow your business. Whether you're dealing with pricing, operations, or customer management, there's something to help you make the right moves.
If you're not a Scalepath member, consider joining—it’s a great community of SMB owners and operators. Members get the guidance they need to grow their businesses faster. Apply today!
The Playbook
Price increases are inevitable.
Sooner or later, your costs will increase, whether it’s inflation, supply chain issues, or improvements in the quality of materials and services you offer. And when that happens, you’ll need to charge more to keep a healthy profit margin for your business.
But it can be nerve-wracking! Lots of SMB operators worry they’ll drive their customers away.
And here’s the truth: you might lose some customers. But if they run away from a reasonable price increase, those aren’t the customers you want to bend over backward to serve anyway.
What’s more, a well-planned price increase can even attract new customers. It’s an opportunity to position your brand as a more premium offering and differentiate from your competitors. Done right, you can end up with stronger customer loyalty than you had before.
Step 1: Research your pricing
The first thing you need to do is figure out what a reasonable price increase should be. You want to reflect the value you deliver to your customers today, not whenever a given customer first discovered you.
Start by collecting competitor data to set a benchmark. What are they charging, and how do their offers compare to yours? Where do you want to differentiate?
Then survey your customers. Ask them what they value most about your product or service. This can help you align your new prices with the features or benefits they already appreciate.
Once you’ve collected data, test new prices on a small group of customers. This will give you a sense of the reception you’re in for.
Two pricing strategies you can try:
- Tiered pricing. Offer multiple pricing tiers based on features or service levels, ensuring each tier provides clear value propositions.
- Bundled services. Create complementary products or service packages, and offer a discount to encourage customers to buy more.
Step 2: Define your messaging
Once you’ve settled on your new prices, take the time to build out your communication plan. The right messaging should make your customers understand and appreciate why your prices are going up.
Here are some principles to follow:
- Be transparent. Customers appreciate honesty. Lay out the changes, explain what they’ll get, and explain why its necessary. (Don’t apologize for it, either.)
- Emphasize what sets you apart. Customers will be more amenable to price increases when they’re reminded of the unique value you bring to them or their business. Compare your offerings to competitors and answer commonly asked questions.
- Use customer testimonials. Reviews, case studies, and other “social proof” can help shape people's perceptions of your company. Focus on the value delivered, not the price.
Make sure you nail down messaging for every channel your customers use to interact with you. Write an email, blog post, social media post, and a script (or talking points) for phone conversations.
While at it, a price increase is a great opportunity to update your branding. Even if your offering isn’t substantially changing, customers will feel the price is just part of a larger upgrade. Go for a more “premium” aesthetic if you can.
Step 3: Roll out incremental changes
Consider a phased approach to soften the impact of your price increase.
Give your customers lots of advance notice about the changes, and regularly reiterate the improvements or benefits of the new pricing.
One way to phase prices in is by segmenting new vs. existing customers. Roll out higher prices for new customers while keeping current customers at the old rates for a set period. Use this time to showcase the added value and justify the new pricing.
Step 4: Monitor and follow up
Keep tabs on how your changes are received.
Run surveys of your customers. Watch online reviews, and be active in responding to them. And keep an eye on your key metrics, like sales volume, customer satisfaction, and retention rates.
(Here’s my easy method for KPIs — the best way to spot problems with your business before they hit your bottom line.)
Now that you’re on the other side of your price hike, make sure you keep nurturing your customers. Three things you can do to keep them happy:
- Create a customer loyalty program. Provide exclusive discounts and offers to loyalty program members and promote these offers through personalized marketing.
- Invest in customer support. Give your CS team some refresher training on how you want to serve your customers.
- Simplify the customer’s experience. Remove as much friction as you can from their journey. Websites and interfaces should be as simple as possible. Help resources should be no-fluff, all value, and easy to find.
Don’t be scared to raise prices. If you follow the steps outlined here, it can be a positive experience for your customers as many optimize for value rather than the lowest prices anyway.
Best of luck — if you have any questions, you can always hit reply. Or better yet, join the discussion in Scalepath, and see how businesses all over the country are solving this problem.
Have a great week!
Michael
