Business Tips, Customer Success | 10 MIN READ

4 Ways to Announce Price Increase to Customers without Losing Them

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.

Lakshmi Kshatriya
Jan 28, 2021


Announcing price increase to customers

Increasing price periodically is inevitable for any growing business. There are multiple factors that account for price increase like rising production cost, staff salary hike, revenue growth, or upgrading the product. While it is a necessary step to keep your business running, it surely is not pleasant for your customers. Hence, announcing price increase to customers must be done carefully so you don’t lose them. If you do it strategically, you would attain your goal without any harm.

Ever imagined what makes Apple’s customers keep spending more on their new products? It is the trust they have established in their customer base. But more than that, there’s an interesting consumer psychology involved with price increase. Most customers tend to associate high price with high quality. And Apple has been leveraging this psychology for decades to generate higher returns from its consumers.

So, if you are scared to increase your price, know that with a right strategy in place you can actually turn the table. It is not only possible to prevent customer churn but, in fact, you can boost their loyalty despite a price hike. Sounds unreal? It won’t be by the end of this blog.

How to announce a price increase to clients

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 work around. Below mentioned are the four ways of price increase announcement to customers.

#1 Be transparent and upfront

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 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.

#2 Give them enough time

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 annual budget, communicating and getting approvals from their superiors, etc.

An even more useful step would be recommending them for more purchase or buying an annual subscription plan on 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.

#3 Demonstrate value

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 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 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.

#4 Keep everyone on the same page

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.

Examples of how to announce a price increase to clients

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.

Below is a price increase announcement letter sample used for converting free users to paid ones.

Price increase announcement letter sample for free users

Below example showing the reason as a rise in production cost in the letter to customer announcing price increase

Source: CrazyEgg

Shown below is a price increase announcement sample of upfront message by Netflix

price increase announcement letter sample
Source: Prisync

Why one increases the Price?

  • Increasing business costs: One of the primary reasons why companies wish to increase their prices is to meet the increasing business costs. For instance, a merchant reseller will have to raise his prices because its manufacturer did so on the raw materials or sources. This in a way triggers the merchant too, to take his prices a notch-up. Additional factors such as utility fees, rental fees and labor costs might add up. And because these factors are out of the owner’s control, and cost-cutting does so much, to maintain the profitability margin, they often incorporate raise their prices.
Source: CrazyEgg
  • Due to Strategic Changes: Sometimes, prices reflect the quality and value of the goods. On that note, a customer links these price points with the quality aspect. And if you as a company wishes to market your goods and offer premium quality, it pretty much makes sense to raise your prices to do all the talking.
  • Rising Industry Shifts: As and when a single company from a niche begins to raise its prices, it indirectly entices the others to follow the lead – which usually is the case. On top of that, advancing technologies or upgraded product features will trigger a company to delve into the rising price evolution. And no one wants to stay behind in the evolution loop, right? That is why to fuel the evolving changes across the industry, companies charge more.

How to limit the impact?

  • Provide multi-product Combos: As long you are selling related items, it is safe to give your customers the combo offer. Simply put, you can club in products in form of a bundle that will add more value to your customers. For instance, look at this example here from HubSpot, you will find that their Growth Suite bundle has a great combination of all the marketing, sales, and customer service software your growing business needs — fully integrated and discounted at 25% off our standalone prices.
Source: HubSpot
  • Slow and Steady wins the Race: Just like the game, it is no fun to abruptly break it to your customers that your prices are now ‘x+10’. A customer will not like the intensity of that blow. If you wish to minimize that blow, you might consider raising the price slowly and steadily. That way, it won’t come as a major shock to the customers. Also, make it a point to avoid doing this frequently without giving them a substantial amount of break in between two hikes.
  • Put up premium price choices on your items: Try to add different price options on each of your items. Say, you can charge a different price for a different color or a different feature. This way, for the customers of yours who are willing to pay a little extra, can easily find their best match with the premium options. Look at this example here to understand this better:
Source: StoreYaBlog

What Mistakes should you avoid in your Price Increase Letter?

  • Of the many things that a customer hates from a company, one that tops the list is the super robotic or computerized tone. They do not want to be handed a mundane script to begin with. What they want is a personal tone. While, announcing these price hike, do see that your tonality is friendly and spot-on.
  • Explain your reasons on why you are making this price lift. Give your customers enough knowledge on your decision and how it would benefit them as well.
  • No customer would like to meet your ‘little surprise’ abruptly. Ensure that you give them sufficient time (at least one month) before you set the price hike. This way, it would not come out as an indigestible shock to resist.
  • It should not be like you sent out an email announcing your price lift and you are done for the month. A customer would want to see frequent follow-ups and let them know if they have any questions in their head. Although ensure that these follow-ups don’t frequent much.
  • Always thank the customer for all the precious time they have given to do business with you. Thank them for picking you and appreciate their value, efforts and above all, their loyalty.

Wrapping Up

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.

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Lakshmi Kshatriya

Lakshmi Kshatriya is a customer success professional with over 18 years of experience in business operations, business development & account management in diverse industries like information technology & entertainment. She has been implementing marketing strategies; analyzing trends and results for improved customer success. 

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