Escalating outlays and flatlined revenue can force a business to the emergency room, figuratively speaking. If the cost of materials, loans and labor soars, drastic steps may be needed. Sometimes you can avoid price increases by slashing production costs, renegotiating leases, changing suppliers or eliminating unprofitable products.
But it’s a balancing act. If you begin to charge more, even loyal customers may balk. Some may flee to competitors. Social media may bristle with negative reviews. When price increases become necessary, it’s crucial to keep existing customers coming back. Consider following these suggestions:
Raise prices incrementally. For example, you might increase charges for new customers while allowing existing customers to lock in existing rates. You might boost prices through add-ons, keeping core prices constant. Airlines have mastered this strategy, slowly adding charges for baggage, premium seats and priority boarding.
Charge more only when existing customers appear satisfied. Survey your customer base first. If most clients are unhappy, problems should be remedied before contemplating price increases. Don’t boost prices in the aftermath of negative publicity, a product recall or a wave of customer complaints.
Customers want to know what they’re getting in return for increased prices. So amplify your achievements. Emphasize the core value of your offerings. Give them something extra: free gift wrapping, new menu items or service enhancements.
Even the savviest businesses can expect some level of backlash when raising prices. Be honest. If you’re in the business of repairing cars, let customers know you’re raising wages to retain skilled mechanics. If you rely on imported raw materials, emphasize the increased cost of shipping.
Above all, keep on top of ongoing operations. Don’t let dwindling revenue plunge you into an emergency.
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