How to raise your prices, without raising heartbeats.
The question of when and how to increase your prices without sending your customers and clients running to your competitors has been around for as long as markets have existed. But it’s particularly relevant right now.
With costs increasing across the board, you will need to raise your prices to protect your livelihood. The problem is, all other businesses need to do the same thing, or cut back on expenditure, to keep their heads above water.
This can lead to some difficult conversations. But there is a way to make those discussions run more smoothly: focus on your intrinsic value (after all, nobody else can do what you do, the way you do it, right?), and make yourself look indispensable.
Here, we look at how to approach price rises with your clients or customers and then unpack what value means in this context. Your business’s positioning will be vitally important – you need to understand what your ideal target customer values and what makes you valuable in their eyes in order to make your prices less of an issue.
The context behind price increases we all know
It’s a tough world out there. Even before the war in Ukraine and Russia’s squeeze on the natural gas supply to Europe, energy prices were already rising. Although fuel prices have decreased a little in recent months after a summer peak, prices at the pumps are still 20-25% higher than they were at the start of year, while people have seen their energy bills at least double and in many cases treble.
The cost of fuel is a key driver in the rising cost of living hitting households all over the UK. All products cost more to produce and transport, so suppliers charge more accordingly. Inflation rates soared to over 10% in September 2022.
In addition to this, post-Brexit UK (coupled with a post-Covid rise in online business, ecommerce and digital platforms for everything) has seen a shortage in labour and skilled staff, creating pressure on employers to attract and retain talent in key areas – from drivers, warehouse operatives, nurses and care workers to digital designers and engineers. Wages have risen in many sectors accordingly, with pay for agency staff seeing the largest surge – as much as 20% up year-on-year.
Add into the mix a nosedive in the GBP to USD exchange rate – making it 30% more expensive to buy goods and services priced in USD than it was a year ago – and you have a perfect storm of high price drivers. With your outgoings increasing, what does this mean for your mindset going into any negotiations?
You have two big motivators to increase your prices
One is around the sheer survival of your business, while the other speaks to your confidence and skills. Psychologically, both are a big deal.
1. Protecting your margins
If your prices remain static while your outgoings rise, your margins will shrink and your business may collapse.
2. Charging for your value
If you’re delivering a great service and allowing your customers to enjoy greater benefits and profits, it’s not greedy to ask for reasonable, justifiable recompense for the real value you provide.
So, with these factors firmly front-of-mind, how do you go about broaching the subject of raising your prices with your customers in a way that generates the least resistance?
Practical strategies around price increases
When approaching your clients and customers with an increase in prices or rates, you need to get your ducks firmly in a row. Rather than a simple across-the-board percentage raise, take a while to understand exactly why and where you need to maintain your margins.
Analyse your products or services
Where in your delivery programme or what products or services might tolerate a price increase most easily? And to what extent? Some lines might need to increase more than others, if they already demand more resources. Or perhaps you could remove some low-profit offerings and focus on those where you can see the best returns.
A small increase on a high-selling article might not make much difference to the customer, but could significantly impact your bottom line. A big increase on services requiring your personal attention will generate less friction from those clients that see a lot of value from your time and input. In every instance, look at the factors that directly affect you and your business, and make judgement calls accordingly.
Pre-condition your clients
Before you hit them with your new rates, give your clients or customers a heads-up that price increases are on the way, and be transparent as to why they are happening. This will pave the way, make your customers feel respected, give them a chance to consider and react, and then allow them time to relax into the idea.
Don’t leave it too long after this advice to then follow up with your new prices – maybe 24-48 hours. Strike while the conversation is fresh in their minds, and before you need to discuss further business.
Prepare for objections
You need to anticipate every response so you feel confident and relaxed going into all discussions. With your team, brainstorm all the objections people could raise (no matter how outlandish) and then thoroughly prepare your answers to every scenario. It’ll seem like you’re totally in the right about your price rises, because you really will have thought of everything.
Listen to clients’ concerns
The biggest desire for most people is to be listened to, and understood. Take comments on board to follow up later if necessary, but it might be that they will simply share the same concerns you have about running a business and you’ll have more in common than not. If you’ve been thorough in your preparation, they might not have anything to add. And, if you’ve positioned yourself well – as the only solution to their needs or problem – then they may not have any concerns at all.
Conveying your increased value
Presumably, you’re already selling results, not simply hours, products or skills. Positioning what you do as more than a commodity is the first step in being able to charge more for the results of your efforts. If everyone else can put in the same time, possess the same raw skills or supply the same products, then you’re on a race to the bottom when it comes to competitive pricing. However, if the results you deliver are unique in any way – and you and your brand will be desirable because of that uniqueness – then you will be on the front foot.
You will also need to do more market research – specifically into your target audience or customers. Find out what they need or expect to see when it comes to perceiving higher value in what you do, and then project this back to them, balanced with what makes you unique.
Your whole brand – your visual assets, graphic elements, imagery, tone of voice, language and personality – will be important factors in conveying your high-value status. And all are areas that we are experts in defining and developing in order to attract more of the kind of customers you want. The kind of customers who wouldn’t think too long about paying a premium price for what you can deliver.
And, finally, anchor your new prices with an even higher-cost offering. If you can develop higher price points in your range of products or services, then the increased cost of your standard offerings will seem reasonable in comparison.
Delivering increased value
To successfully justify a raise in prices, it’s not enough to simply convey value (although that will get you a long way with many customers). You have to deliver it, too. Walk the walk as well as talk the talk. Live up to what you promise.
If you’re charging above-average or premium prices, then your standards of work need to match this accordingly. Make sure you’re doing work that’s not only unique to you, but also something you are proud of.
To complement this, make sure your personal standards are on the same level. Most leading businesses already do this instinctively, but consider your punctuality, promptness of delivery, manners, empathy with customers and your helpful attitude.
And on a purely practical level, be generous with your advice. Provide value up-front with guides on how to do what you do, or advice on ways that customers can maintain the benefits of your products. Ironically, in most cases, this will convince your customers that they really don’t want to do it themselves, and they’ll gain greater respect for your services (and perceive the value in them).
If you actively deliver on the brand image you convey, then you’ll reap the rewards through better word of mouth recommendations and written reviews, no matter how much you are charging.
What does value look like to your customers?
There are basically two reasons why customers will see value in what you do. They are:
You make their lives easier
If what you do or produce helps them to save time, effort and mental energy in the path to achieving an important goal for them, or allows them to make more money (which can, incidentally, buy all three) then your customers will see value in what you do. But it has to be directly related to their own priorities, not yours.
You make their lives more pleasant, enjoyable or fun
Simple pleasures can be very important to people who need a bit of respite from their day-to-day pressures. Just ask Netflix. To be honest, perhaps this is just another important goal that fits into the above point, but it’s one that might not make more money for them.
Remember: customer retention is a key factor in maintaining your business, whether you’re increasing prices or not. It’s far cheaper to grow sales with your existing customers than to find new ones. Develop a great relationship with the customers and clients you’ve already got, and when the time comes to increase your prices they will likely trust that you wouldn’t be doing so without good reason.
Get it right, and you’ll weather the storm in a recession
When you take this analysis to its logical end, there is only one conclusion.
If what you deliver is exactly what your customers deeply need and want, then pricing actually becomes almost unimportant. You have the result they desire. Your price is simply what they need to pay to get it, because there is no choice – nobody else can provide it like you can. Effectively, you have no competition.
And this will ensure you and your offerings still have a keen market, even when times are tight.
Make your brand match your value
You know you’re worth more. So make sure all your public-facing assets are projecting your true value and speaking to customers who place quality above price.
Contact us today and take the first steps towards charging more with confidence. We know, because we do it too.