7 Ways to Raise Prices in Your Business

July 19th 2024

Every business reaches a point where its prices need to be raised.

Often that is due to rising costs for materials and services but other times it can be to remain competitive with other businesses selling the same thing, or it can be to reposition the company or brand from lower end to higher end.

Sure, some companies elect to lower prices occasionally, such as Target’s recent announcement that it would reduce prices on 5,000 items this summer and Walmart’s claim it has already dropped prices on 7,000 products. However, you’ll notice neither retailer is reducing prices across the board on all products, nor is this forever; it’s likely a short-term strategy to get customers back in their stores.

Eventually, those prices will likely be quietly reset. 

If you’ve decided that it’s time to raise prices on some or all of your products or services, here are 7 strategies for softening the blow so that you don’t lose customers.

Communicate the price increase well in advance

Most customers understand that prices rise over time. It’s almost inevitable.

However, you’re likely to reduce any irritation or backlash by alerting customers of the coming increase. You don’t have to justify it but if you feel you need to, you can reveal that the cost of raw materials has increased 25%, or whatever the number is and you need to adjust yours accordingly.

Reduce the size of what you sell

Rather than announcing that prices will be increasing for your existing products or services, you could consider reducing the portion size of your product or the length of time you spend on a particular service.

Food manufacturers are constantly doing this – reducing package size while maintaining the same price, so that it doesn’t impact customers’ wallets but they do end up receiving less than what they used to for the same price.

You can do the same. For example, as a salon owner, maybe your hair appointments shrink from 90 minutes to 75 or 60, so you can get an additional client through each day.

Add value along with an increase

If it won’t cut into your profit margin, think about whether you can offer something of added value along with a price increase. Customers may be less bothered (if they’re bothered at all) by this.

For example, if you increase your dog walking fee maybe you also throw in a free treat at the end. Or if you’re a management consultant, maybe you add a quarterly project audit to add value in addition to increasing the fee.

Make sure what you’re giving as an added bonus costs less than the total of the increase, however, so that you are effectively raising your profit margin.

Start with a discount

Many companies lower the price of new products and services initially in order to build up a fan base.

You can do the same by increasing prices but then offering a special discount for the first month or two, depending on what you’re selling. Or you could let your existing customers know that the price they pay won’t rise for another three months, although new customers will pay the higher price from Day One.

Bundle your offerings

In addition to a straight-up price increase on one or more of your products or services, you could also consider designing a bundle that increases the total price of each purchase but feels like a better deal to your customers.

For example, if you run a snow removal service that bills by the season, how about bundling snow removal and lawn care for one year-round price? Or, at your restaurant, how about offering a salad, entrée, and dessert bundled price that is less than what the three would be separately, as a way to increase the value of that customer?

Become consistent about price increases

Customers are less likely to have an issue with an increase when it’s a regular occurrence. So, even if you haven’t in the past, consider bumping up your prices every year, such as on January 1.

This is a smart approach if you’ve recently discovered you’ve been undercharging and want to move the needle quickly, but not all at once. Maybe this year you increase prices by 15% or 20% and then 5% to 10% thereafter. Train your customers to expect that prices will rise.

Target new customers

If none of these strategies works and the majority of your customers gripe about the increased cost, you may need to shift your attention to a new customer base. That might mean sending out a direct mail piece to a higher-end zip code in your area, conducting outreach to larger businesses, or shifting your social media message to convey that you’re higher end.

What you don’t want to do is to continue to charge less for fear of losing a customer. All you’re doing is hurting your business when you do that. Charge what your product or service is worth. If you lose more customers than you’re comfortable with, re-engineer how you’re selling so that they feel like they’re getting a deal and you’re still earning a profit.