When did you last increase your prices? Are your current prices competitive? Is the lack of price increases impacting your profit margins?

In today’s dynamic business environment, staying on top of your pricing strategy is crucial. Understanding your costs and setting competitive prices are essential for success. This blog post will explore key strategies to ensure your pricing accurately reflects your value proposition and helps you achieve your business goals.

Despite these challenges, the reluctance to raise prices is a common concern, driven by fears of customer resistance or potential loss of business. The apprehension often stems from questions like: What if we come up against stiff resistance from customers? Or what if they take their business elsewhere? What if they are less accommodating because inflation is decreasing now?

In reality however, price increases are still happening everywhere due to the increase pressure on businesses and are something you should be forecasting and reviewing every single year. We’ve had some interesting conversations with clients over the past few months regarding pricing and we’ve found many businesses are facing increased costs now which will have to be passed on to their customers in order to stay afloat.

We’ve found that many of our clients fall into three categories:

  • Customer Perception: Some owners have taken a stay back, reviewed their pricing and realised they haven’t been charging enough for years. Many haven’t increased their prices since the economic crash of 2008 for fear of “upsetting” customers and losing business.
  • Increased Demand: The demand for some services has increased and therefore consumers will be willing to pay just that little bit extra.
  • Increasing Costs: The cost of living, materials, employees has increased drastically in the last few years meaning the price of what you do has ultimately increased and needs to be passed on.

Setting prices can be as complex or as simple as you make it. Below we explain a formula and some tips that can help you increase your pricing without upsetting your customers.

A simple method to increasing prices 

The simplest method is to apply an inflationary increase to your prices. An increase of between 1 to 5% can often prove palatable to customers and can have a bigger impact on your profitability than you might assume.

A McKinsey study found that a simple 1% increase in pricing can potentially deliver an 8% increase in net profits. If your business increases prices a little every year, then it not only means you can keep pace with inflation but it also means you don’t fear those price increases each year because not only are your customers used to it but you are too – it becomes a normal in your organisation.

In the lead up to Christmas 2016, we wrote a brief article about the complexities of inflation and pricing, and how the published rates of inflation might actually not be the same as the inflation your business experiences. Inflation in your industry could be even higher! To read more see our article: What we can learn from Toblerone.

If your business’s largest cost is the people it employs then your business will be experiencing inflation higher than the than the headline average. Some sources are saying that inflation in the wages market is as high as 7% in some sectors. It also means that if your prices are not increasing then the chances are that next year the profits of the business will decrease.

If, in a year’s time, your business’s profits are down, and you didn’t increase prices now will you have the courage to say it was your error to not increase prices to meet the rising costs? How will you then tackle the declining profits for the year ahead at that point? Difficult decisions only get harder the longer you hold them off.

Of course, a little thought is needed as opposed to a blanket 3% increase across the board. You need to do some research into the products and/or services that can take a price increase or bundle some together.

How to increase prices without upsetting your customers 

Step 1 – Do your research and play the numbers game 

Do your due diligence and gather as much information as possible on past price increases you’ve made. You need to learn how customers have reacted to price changes in the past and what prompted these changes. Review what impact this had on your customers and your profits. This way you know how to deliver the news to your customers.

Also take the time to research the demand of your products and services in your customer base and the market. This way you can adjust your prices per service / product rather than just a blanket increase across the board. You may also find some services / products see little sales, so you could bundle them together! Or you could offer different options. For example, if you usually sell a 10-pack of toner cartridges for £100 but need to raise the price to £120, create some additional, different-sized packages, such as a five-pack for £70 and a three-pack for £45. This makes the 10-pack seem like a deal, even at the new, higher price.

We can produce reports for you with all of this information so you can make informed decisions here. Just get in touch with us at enquiries@a4g-llp.co.uk. 

Step 2 – Tell your team!

Don’t just inform your marketing team of price changes, you need to educate your whole sales team on how the price increases will affect them. Educate them on how to pass this on without upsetting your customers (we’ll come onto this next!).

This is a great opportunity to remind them of the value proposition and how you may have improved the products or added new features.

You want to start the internal communication process at least three months ahead of the effective date for the price change. This gives the sales team time to equip themselves with the right message for the best customers and can actually help conversion of current prospects as there’s now a deadline for current pricing.

Step 3 – Communicate with your customers 

If you haven’t increased prices by an inflationary amount in recent years then it can cause difficulty because your regular customers are not expecting the increase. The communication with your clients and customers has to be clear and requires preparation to minimise debates and ensure a successful outcome.

The point to bear in mind is that your customers and competitors face the same challenges and some of them will be, or should be, contemplating a similar strategy. This can help in how you communicate to your customers as you will need to be prepared to explain the reasons behind your price increase, and no one should be embarrassed to stand by such a decision. Ultimately a business has to make money otherwise it would be called a charity.

If you have a policy of incremental price increases each year, then your customer base will be used to this policy and a consistent and fair approach to pricing will remove some of the inertia felt in comparison to a business that is nervous about its pricing.

The best ways to tell your customers about a price increase without upsetting this is to:

  • communicate with your customers transparently
  • provide a meaningful explanation for the price increase
  • choose the best timing to increase prices – ideally when you’ve just completed work for them they’re happy with
  • regularly change and increase prices (when necessary and justified)
  • amend your marketing strategy to highlight improvements in product or service quality

A price increase letter template: 

Dear [first name],

We hope this letter finds you well. At [Your Company Name], we appreciate your continued support and partnership. Over the years, we have been committed to providing you with high-quality products/services and maintaining the utmost transparency in our business practices.

For us to continue to invest in making [Company] better for you, we need to increase our prices.

[Explain the reasons for the price increase, such as rising production costs, improvements in product/service quality, inflation, or any other relevant factors.]

Despite our best efforts to absorb these increased costs, it has become necessary for us to make this adjustment to ensure that we can continue to deliver the level of excellence you have come to expect from us.

You’ve been extremely loyal to [Company], using us for the last [Time spent as a customer], so as of today we’re raising prices on new customers, but we’re going to keep you on your existing price plan for the next [X] months (after which we’ll bump you up to the new price of [New price])

Thank you for being a valued customer. If you have any questions at all, let me know.


[Your Name]

Review your pricing strategy with us

Adopting the 1 – 5% price increase approach year on year requires courage to get started but a strong initial decisions results in easier processes for the future.

A 1-5% price increase may not be enough for your business in this current climate. If you’re worried about how to increase your prices or about your profits, please get in touch for a personalised discussion on your strategy here.

Pricing is a section of our A4G Breakthrough Recovery Programme. In this programme, we can work with your on a 1-2-1 basis over 6-18 months to help your business rebuild and grow. We can help review your pricing and commercial approaches to achieve a more profitable and secure future for your business.

Email enquiries@a4g-llp.co.uk or call 01474 853 856 to find out more.

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