There’s so many positives to owning a small business: Being your own boss; knowing your loyal customers by their first names; offering personalized services and products to your unique client base. And one of the biggest downsides? Needing to raise prices on occasion.
Sure, customers dread price hikes. But small business owners really fear them because they worry that upping rates will drive away business. While it’s possible that you will lose a few diners or shoppers, boosting prices isn’t a business killer. In fact, when handled properly, price increases can actually help you build a strong, better, more trusting relationship with your customers.
Follow these tips and watch your profitability increase.
Maybe you’re raising your prices because you’ve increased your expertise and now your services are worth more. Perhaps your industry has experienced a boost in demand and there isn’t enough supply to meet it. Or it’s simply quite likely that your expenses are rising, and you need to match that rate in order to stay afloat. Explaining the increase to your customers demonstrates transparency and respect for their business. It’s likely that they’ll understand and continue to patronize your establishment.
Package two or more products or services together enables you to enact fair price increases on all the components while also giving customers a better deal. When bundling, be sure to sell each part individually as well. A study from Carnegie Mellon University found that shoppers are receptive to bundling when it’s offered alongside a la carte options.
Change the deal, but don’t eliminate it.
Many small businesses offer shoppers loyalty programs for buying in bulk or making frequent purchases. Small tweaks to these allow you to up how much you charge while still providing the client with the feeling of getting a discount. So the next time you need to raise prices, switch things up. Instead of offering “buy 3, get one free,” change it to “buy 5, get one free.”
Play up the value.
Consumers are willing to part with their hard-earned cash when they know they’re getting something that’s truly worth the cost. Emphasize an item’s quality or explain how the services you provide differ from your competitors. And of course, it’s always a good idea to over-deliver or improve your offering (with a new feature or complimentary add-on) to make the higher price even more palatable.
Give advanced warning.
Customers like surprises, but not when they require the shelling out of additional cash. If you plan to raise prices at your salon, for instance, tell your clients well in advance (think: three months ahead). They’ll appreciate you giving them the opportunity to take advantage of their favorite services now before costs increase.
Create new selections.
Just about all customers take price into consideration — but it usually isn’t the sole reason why they hit up your bakery for, say, fresh blueberry scones. When nudging the price upward, continue selling your regular varieties, but introduce a “special” (like blueberry lemon poppy seed) and sell for the same price as the others. This makes it apparent that you’re improving your offerings instead of just making people pay more for the same item they used to get for less.
Sell a more affordable version.
The next time you need to increase your prices, add a cheaper option to your menu. Doing so keeps loyal patrons that are extremely price-conscientious satisfied, while also attracting new ones who previously never considered purchasing the higher-costing item or service, as well.
Happy customers = happy business owners.