Announcing price increase to customers might be a daunting task for companies. But with the right strategies in place, you can even win their loyalty.
You may need to increase your prices for multiple reasons. It can be due to inflation, increased product ranges, features, and more. Stagnant pricing can be harmful to any business. It will help if you need to let your customers know why you are increasing the prices. Increasing prices without intimating the customer can lead to negative trends. Customers need to understand the intention behind the price rise. Therefore, you need to communicate the reasons for the price rise.
The ultimate goal of any company is to enhance customer loyalty. Customers need to know why the price changes took place. They need to know why doing business with the company is still in their best interest.
Before you convey this message to customers, you must understand the Gain Principle that holds true for every customer.
Gain = Value – Cost
What customer finally gains from your product is the overall value minus the cost involved. Hence, the logic becomes simple. If you want to win your customer, show and prove them more gain. This is possible by demonstrating value much higher than the increased cost. If your price increase is x, your value increase should be 2x, 3x, or 5x.
How to show them more value from your product is case-specific and for you to think and workaround. Below mentioned are the four ways of price increase announcement to customers.
Imagine if your Amazon Prime bill increased from $9.99 to $16.99 every month and you do not have knowledge or consent. You would be furious, right? A customer who suddenly finds out that there is a price increase may get scared and angry. You can go through a list of customers, ensure they are notified about the price increase, and then send a thank you letter if possible. You can personalize the process for the customer.
Before you reach out to customer, be aware of the looming fear within you in conveying this message. If it is within you, your customer would easily sense it and behave unfavorably. Hence, be so confident in sharing about the price increase that the customer gets curious to know the rationale behind it.
If you are sending an email, instead of redirecting them to your pricing page, show them an image of new price in the email itself. This shows that you are not hiding the information but sharing it unapologetically.
Even though a feeling of discomfort would arise in the customer’s mind, you have to reverse their perception. And the first step in doing so is by not empathizing with their pain because it will only make it more real. Only when you believe and express that it is not a pain for them, would they be open to know how instead of dwelling in their negative emotions.
Don’t increase the price overnight. Your customers should get enough time to come to terms with this update. Also, there might be other obligations they have to consider like readjusting the annual budget, communicating and getting approvals from their superiors, etc.
An even more useful step would be recommending them for more purchases or buying an annual subscription plan on the current price before the price hike becomes effective.
Be aware that it is inevitable for them to at least think once for your alternative. You cannot control it and neither should you try. It is also true that they won’t leave you without having a word. And the switching cost is another barricade for them. So, let all their reactive emotions subside before you approach them for further discussion.
Value can be perceived in many different ways. Also, there can be different reasons accounting for price increase. You might need more funds to do the necessary research and development on the continuous upgrade of your product. Alternatively, the cost of goods sold can also be rising due to the rise in the cost of various resources needed for production. In this scenario, the value obtained is nothing but the consistency in the quality of the product over time.
While announcing price increase to customers, convey them that you are upgrading the quality of the product or at least committed to maintain the same quality in future. The former case is easily acceptable. Whereas in the latter scenario, you demonstrate value by not only showing your commitment towards quality assurance but also reinforcing the fact to their conscious brain that your product is already of a superior quality.
If it is a product upgrade scenario, make sure you demonstrate them in numbers what value this upgraded product would bring. It could be in terms of more revenue, more savings, reduced cost, reduced time and effort, etc.
Announcing price rises can be made simple if you assure them of better quality. Price increases can be confusing for customers if they are regular users and purchasing the product for quite some time. This means you need to ensure that product quality is maintained and stressed upon.
To meet high product quality standards, you need to meet operating costs, material costs, hiring costs, and more. All this might lead to an increase in price.
As your business grows, the worth of your products and services will directly increase. Justify the price rise and show how it will help meet customer needs and serve them better. Keep in mind that there is no need to be sorry and apologize for a price increase. Your customers will remain loyal if you prove your value and reliability. It would be best to be confident that the product is worth the price.
Price increases can be handled if there is an appropriate value increase. You need to over-deliver on the value aspect to show that the amount of value you are willing to provide is more than the prices you charge. This will help your customers know what they are paying more for. For example, if the price of prime subscription increases, it needs to show where the value has increased as well.
In case you are selling a useful tool or service, you can let them know of new and informed features. This will soften the blow about the price rise and ensure customer satisfaction. Loyal customers will understand price rises and product enhancements. This will also help you renegotiate terms with your customers and revise deal agreements.
Give customers the option to choose a lower-priced product. Please give them the opportunity to go for alternatives. Offering customers, the same product with various features at different rates gives them the flexibility to choose. With this, they focus on the value they get.
Customers need to know that the main goal of a price increase is not a profit increase. This impression can be harmful to the company and customers may develop a negative image of the company. Focusing on value is the most important thing companies can do to ensure customer loyalty remains.
Make sure that the information reaches everyone on both the sides – vendor and customer. All the stakeholders in customer organization that a CSM is in touch with should know about this update. By communicating to each of them, you open a channel for anyone who is willing to discuss further. Through this, you can take control and veer their emotions in a positive direction. Otherwise, if they get to know this from one of their own, the negative sentiments would grow further.
And on the other side, everyone in your own organization should also be aware of this price change. It would be an embarrassment if one of your employees charges an outdated price to your customer.
Thank the customer for understanding the price rise and feature updates. You need to sincerely thank their support and patronage in case of a price rise. Inform them about the reasons behind the price rise and be genuine about it.
Although it is always better to inform this to your enterprise customers over phone or in-person, it is not possible to do so for a large set of customers. Hence, you need to draft an email for communicating to your mass audience. Let’s look at a few examples of them.
Price hike is an inevitable part of business journey, both for customers and vendors. Announcing price increase to customers is an art that you need to learn one day or another. It is the time when all the customer success strategies come to test. If you have been working constantly towards helping your clients succeed, and have strengthened your relationship with them, your price hike would be seen as nothing more than a minor glitch.
Think of something different in making them realize more value from your product, especially for this occasion. By focusing more on value than cost, you would help them perceive more gain which is the ultimate way to boost their loyalty.32
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