It’s tricky raising product prices – especially when existing customers have relied on a certain price point. While bumping up price tags is almost never met with a chorus of cheers, there are strategies to make this a smooth and positive transition without losing your loyal target audience.

In his Inc. article “How to Raise Prices Without Losing Customers,” Jeff Haden shares some great tips for achieving this delicate balance. We’ve summarized some of his ideas below:

Instead of focusing on the price increase, communicate enhanced value with the introduction of new products and/or services. Doing so, will shift attention away from the drawback and toward an added benefit. Additionally, a new and very cool packaging design at the new price may seem like a huge win for consumers.

If you want to keep the price the same, can you tweak the volume at that price to boost margins? For instance, a shift in ounce size by two ounces will be an unlikely make or break situation for customers. Also, think about offering a lower volume point with a higher per-unit price where customers will need to buy in bulk to get the discount.

If there is one particular product/service on which you need to raise a price, consider pairing it with complementary products at a beneficial price to the customer. Many customers prefer the bundle deal, especially if it’s a convenient way to get all their needs met in one purchase.

Are there higher priced options that can dually improve your bottom line and customer experience? If you currently offer 2-day shipping on your product, consider offering an overnight option with an appropriate markup to boost your margins and customer morale. Even if the price is higher, you may change the customer’s mindset with the value-added choice.

If you are raising your prices, you have good reasons behind the decision. Let people in on it. If your raw material cost has doubled, explain the change in the industry that is impacting your business. If you are raising the price because of increased value-added features, promote this necessary change as a good thing. Overall, even if your customers don’t love the price tag hike, it makes a world of difference if they understand why it happened. If the cost increase is temporary (due to the economic climate), keep your customers updated on possible timing when your prices may return to normal.

Any major changes to your business, including price increases, should be phased in slowly in order to minimize customer confusion and potential backlash. Contemplating a price hike is also an optimal time to reevaluate many areas in your business. Consider the following:

• What are your product margins? Should some low-margin products be phased out so you can focus on your most successful and profitable offerings?
• What is your competition up to? Is there a gap that your products and services can fill while giving your business a leg up?
• Are your fixed costs as low as they can be?
• Can you tweak your variable costs (labor, productivity, quality control, shipping, inventory) to become a more cost-effective organization?

Above all, make sure that you communicate customer appreciation continually, including when you raise prices, and especially when your company may be battling difficult financial times. Reward your customers with incentives and talk with them every step of the way. A loyal customer will stick with you through good, bad, and everything in between.

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References:
http://www.inc.com/jeff-haden/how-to-raise-prices-without-losing-customers-fri.html