Raising your rates is a part of doing business. Follow these steps to ensure your price increase goes smoothly for you and your business.
There are many reasons why you might consider a price increase. Indeed, many consider it a business best practice to work through an annual price review.
But there are also factors outside your control. Inflation, supply chain issues, wage increases, competitors’ increased rates, and more may make you think it’s time to raise your prices too.
No matter why you’re doing it, 1 thing is a constant: Fear about how to communicate it to your loyal customers. Our advice? Be frank but kind. Price increases are a reality of running a business.
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4 Ways to Increase Prices—Without Backlash
Most businesses need to increase their prices at some point—even if it’s simply to adjust for inflation. However, notifying your clients or customers is a much more delicate matter that must be handled with care to avoid resentment and anger.
Follow these 4 steps to help ensure your rate increase goes smoothly for your team, your customers, and your business.
1. Notify Your Team First
Once you decide to implement a price change, your first order of business will be to announce the news to any employees. After all, this change will affect all of them, even those who aren’t on your customer service team. You want to make sure everyone is on the same page and prepared for a price change.
This is also a great time to meet with your team and strategize on the messaging they’ll use when customer feedback and inquiries inevitably arrive. Brainstorm concerns and questions your customers might have, and plan how your employees will respond ahead of time. This ensures your team won’t deliver the wrong answer to already unhappy customers and that they can handle potentially awkward situations in the best possible way.
This information can also be used as the foundation for a price increase FAQ page on your website (more on this later).
2. Give Customers Advance Notice
Your customers should hear about your price increase directly from you, so you need a plan for communicating the news to them in a tactful way.
Think back to the last time you received an impersonal message from other businesses about a problem you had. How did that make you feel? Not good, probably. The same goes for your customers.
Many of them will likely need to assess whether your new prices fall within their budget. If not, they’ll need time to adjust their expenses so they can continue buying from you—or find an alternative before your price increase kicks in. Either way, you want to ensure that, even though you’re not bringing your customers great news, they still feel taken care of.
To start, notify your existing customers or clients of the price increase 2–3 months before the scheduled increase date. Use a variety of ways to do so, including the method of communication you use most often with them.
For instance, if you typically send updates via email newsletter, you’ll likely reach most of your customers through that channel. But not everyone checks their email inbox. Use additional methods to reach those customers, so they’re not surprised by the rate increase. Some options include:
- Adding a banner to the top of your website
- Posting the news to your company’s social channels
- Mailing customers price increase letters
- Calling them directly
Remind customers about the change with an additional email a few weeks before your price increase. By prompting them to buy your products or book your services before the price goes up, you can use this correspondence to increase revenue for your business.
3. Direct Customers to an FAQ Page
Your customers will likely have similar questions about your increasing prices. But most methods of communication don’t give you the space to answer them all, and you also want to be respectful of your customers’ time.
An FAQ page on your website allows you to answer your customers’ most pressing questions and concerns at their leisure. This can also help reduce the number of questions your customer service, sales, and social media teams get from concerned or angry customers.
You may find it helpful to include the following information:
- Further details about the price increase, including the date the new rate will kick in
- Context and justification for the change—be sure to make it about increasing value to them, not the pain points you and your business are experiencing
- How customers can cancel their membership or end their contract
- Who to contact if they have additional questions
As new questions roll in, update your FAQ page accordingly so it has all the information your customers need in one place.
4. Start With New Customers
New customers present you with a great opportunity to test out your increased rates, as they haven’t worked with you yet and are still forming their impressions of you and your business.
You can count on nearly instant feedback on whether your new prices are too high, too low, or just right. Go too high, and every new lead will reject your offer outright. Go too low, and you may find that nearly all of them say yes to your offer to take advantage of the savings. Ideally, you want to reach a number that supports your needs, and most of your qualified prospects say yes to.
How to Communicate a Price Increase
A price increase letter formally notifies customers that you’re changing prices for your goods or services.
As mentioned earlier, you should strive to communicate this change to your customer base in a tactful and empathetic way, so you don’t upset them. As a result, these letters often include justification for the price raise to help soften the blow.
With that said, here are some tips to help you write a price increase letter for your own customers.
Be Direct and Concise
Now’s not the time to sugarcoat things—be upfront with your customers. Explain to them in plain terms that your prices are going up. You’re not going to make them feel any better by calling your price increase anything but. In fact, not being clear can actually confuse your customers instead (i.e., don’t say price adjustment when it’s a price increase).
In your letter, state that your prices are increasing, provide the reason for the increase, the date the price hike will go into effect, and list out any action items they need to complete (if required).
Keep in mind that a long-winded essay isn’t needed here. Just say what you need to, and if readers want more information, they can visit your FAQ page or speak to a member of your team directly. Basically, writing less will result in clearer communication and less room for interpretation or confusion.
Don’t Apologize—Show Appreciation and Empathy Instead
You don’t want to be overly apologetic here, either. Price changes are a natural part of doing business. At the end of the day, you need to do what’s best for you.
Instead of apologizing, turn things around and show appreciation and empathy for your customers. After all, it’s only because of their business that you’ve been able to grow yours.
Avoid corporate speak and write directly to your customers. Thank them for their continued support, and offer to help make this transition easier for them. Most importantly, don’t make light of the situation—especially if the product or service you provide is crucial to their personal lives or business.
Taking the extra time to do this shows your customers that you care for them beyond the money they spend with your company.
Provide Justification for the Decision
How you justify your price increase can mean the difference between an angry customer and an understanding one.
By justifying your decision with a reason they can understand (and possibly even relate to), you give your customers less of a reason to believe that you’re only raising prices to increase your revenue. Hopefully, they’ll be more open to the change and appreciate your transparency on the matter.
Explain why you’re raising your prices in your own words (again, ditch the corporate speak). Be as specific as you can without going too much into the details. For example:
- Has the product quality increased?
- Has your additional training or equipment helped you improve overall results?
- Have the costs of raw materials or distribution gone up in your industry?
Layer on the value to them wherever you can in order to tie their added cost directly to the benefits they get from your products or services.
If they have to pay more to continue working with you, it’s fair for them to know why you decided to increase your rates in the first place.
Lead With Value
Now is a great time to remind your clients why they chose to work with you and what they can expect from your business moving forward.
Can they expect an increase in service or quality with this update? More deliverables at the same price? An additional month added to their subscription free of charge? Be specific here, if you can.
For example, if you’re transitioning from hourly pricing to value-based tiered pricing, you may want to list all of the additional features or services your clients will now get to show that your new pricing options aren’t lacking in value.
If you have any upcoming releases or new features your clients would be excited about, this is a great time to announce that too.
Use This Price Increase Letter Template for Your Own Business
Still struggling to put together a price increase letter of your own? Use our template below and tweak the details to match your situation.
Subject line: Update: New Rates Starting [Date]
Hi [Client Name],
It’s been a pleasure working with you [and your team] over the past [X months/years]. I appreciate your business and value our professional relationship.
Because I consistently build on the level of skill, experience, and service I bring to every project, it’s important that my rates reflect the increased value you receive. [Add specifics. For example: Additionally, I will be expanding my team this year to better provide the hands-on service and digital marketing expertise you require from your marketing agency.]
So as of [date], I will be raising my hourly rate from $XX to $XX. [Include new rates per each service, if appropriate.]
Since I love working with you, I’m happy to extend my existing rate for any work you book now through [rate increase date]—even if you don’t need it until after the date passes.
If you’d like to discuss booking projects ahead of [rate increase date], or if you have any questions or concerns about the change, I’m happy to set up a call to discuss.
Thank you for your support and your understanding, [Client Name]. I look forward to our continued success together.
[Your favorite sign-off],
Wondering if It’s Really Time for a Price Increase? 4 Signs to Watch For
So now you know how to communicate a price increase. But how do you know if now is just the right time? Here are 4 signs that indicate your business is ready to raise rates.
1. Your Business Costs Are Increasing
As a business owner, you know how much revenue you need to keep your company afloat and your bills paid. If you’re now seeing a higher cost to deliver your products or services—whether it’s due to increased material costs, wage increases, or something else—it makes sense to raise prices accordingly. Otherwise, you’re only losing money.
Know you’re not alone either. A recent Goldman Sachs survey found that 97% of small business owners feel inflationary pressures on their business have increased or stayed the same compared to 3 months prior. Perhaps, as a result, another 65% of respondents raised their prices to offset the current economy’s effects on their company.
2. You’re in Demand
Maybe you constantly work to fulfill a backlog of orders that never seems to end. Or perhaps you regularly get referrals from raving clients but have to turn them away because there aren’t enough hours in a day.
If you find yourself with an abundance of work but an inability to take it on, a price hike can grant you the resources and people you need to increase your team’s bandwidth—all while still keeping your current clients happy.
Don’t worry too much about whether a rate increase will cause you to lose customers, though. If they’re happy with the products or services you provide, they won’t mind paying a little more to continue working with you.
3. You’re Undercharging
Keeping your prices in the same range as your closest competitors signals that you take your business seriously and understand the value you bring to the people you serve. On the other hand, low rates indicate to potential clients that you don’t really know what you’re doing (even if that’s further from the truth).
Plus, if your competitors are charging higher prices for offerings that are the same or lower quality as yours, it’s clear that your target audience is willing to pay more for what you can provide. By not raising your rates, you’re actually losing out on potential revenue.
4. You Leveled up Your Craft
How do you put a price on years of experience? When you’re in business for an extended period of time, you steadily increase the value you bring to the table. This shows up in the enhanced skills needed to complete complex projects, product improvements that improve customer satisfaction, and investments in tools, training, and people.
Although you made these decisions with your customers in mind, they still come at an additional cost to you. So, with the value of your offerings increasing, it’s only fitting that you charge more for them too.
A PwC report found that about 4 in 10 consumers are willing to pay more for greater convenience (43%) and a positive experience (42%). And you see this play out in real life all the time—it’s why people will pay a premium for grocery delivery services or meal prep plans that make their lives easier.
Raise Your Rates While Keeping Your Customers Happy
You’ve worked hard to get your business to where it is today. But if you don’t regularly raise prices to account for business growth and future needs, you’re doing yourself a disservice.
Announcing a rate increase to your customers isn’t at the top of anyone’s to-do list. By following the tips above, you’ll be better able to communicate the change to your customers and support them during the transition.