The coronavirus pandemic has forced nearly all businesses to rethink almost everything, from operations to staffing to customer experience. It’s been an enormous challenge, and many businesses have lost revenue they couldn’t afford to lose.
But a time when everything is in flux also presents some opportunities to reexamine aspects of your business that you might not have questioned otherwise. Perhaps you’ve been rethinking your tipping policy as more and more customers are doing pickup or takeout. Perhaps you’ve renegotiated some supplier agreements, or streamlined other costs.
In some ways, the tail end of a pandemic might feel like the worst possible time to raise prices. But if you’ve looked at your books and you need to raise your prices to survive and thrive, there are ways to implement a price increase without alienating your customers.
Here are seven strategies for successfully increasing your prices:
It’s tough to know what’s coming in the next year, given all the uncertainty around the course of the pandemic. But it’s best to avoid having to raise prices multiple times in short succession. Make a plan that will get you through a worst-case-scenario year in which labor and supply costs continue to rise, but consumers pull back on spending. Set your new prices at a level that will keep your business healthy for a year of uncertainty.
Put yourself in your customer’s shoes and research what other businesses in your area are doing. Think outside the box when it comes to considering who your competitors are—don’t forget national chains offering free shipping, and think about outside-the-box alternatives. Are there independent stylists making house calls in your area who might lure customers from your salon? Could your customers get a meal-kit subscription as an alternative to getting takeout from your restaurant? Look at what all these competitors are doing on pricing—other local businesses may be raising prices, and many national chains are, too.
Whether or not you decide to post a message in your store or on your website about the price increase, prepare your staff to handle questions about it. Give them talking points to use when customers bring up the issue. Take a few minutes before each shift for a week or two to roleplay conversations about prices, so staff are prepared to answer questions in a friendly, upbeat way. And make sure you prepare your staff for the likelihood that a few customers will be angry, and may even threaten to take their business elsewhere. Remind them of the usual best practices for handling difficult customer conversations.
If you’re facing sharp price increases for certain supplies, look for ways you could avoid using that particular product or look to add a temporary surcharge to certain items. For example, prices for beef, chicken, and pork are up about 10%, and many small restaurants are pulling pricier meats off the menu in response. During the early phases of the pandemic, some small businesses added temporary surcharges to cover new expenses like increased staff time spent cleaning or the cost of personal protective equipment. Some restaurants added service charges to ensure staff were fairly compensated while customers were doing more delivery and takeout. Be aware, however, that communication is key—a sudden new charge can backfire if it’s perceived as opportunistic. Make sure any new charges are clearly explained on your website, with signage in your store, and through staff communication to customers.
While it’s important to be transparent about price increases and communicate clearly with customers, price increases may be easier to accept if they come with a fully revamped menu of offerings. A service business might add new, higher-touch packages that come with a higher price tag as well as some discounted packages for price-sensitive customers. A restaurant might introduce price increases along with a newly refreshed seasonal menu. If customers see that they have options, and that you’re making the effort to keep your business up to date with changing trends, they’ll more easily accept a price increase.
Make sure you’re still offering your customers a great value, even at your new, higher price points. Standout customer service can help smooth over any ruffled feathers that come from higher prices, and make your customers feel like they’re getting a great value for a modestly higher price. Look for inexpensive ways you can create a premium experience, whether through customer service or design elements that will enhance your brand.
Price increases should be a regular part of doing business—and right now, given all the uncertainty around pricing for raw materials and the shape of the economic recovery, it’s even more crucial that you keep checking your business’s key performance indicators and monitor how well your current price points are serving you. Ideally, planning for the worst-case scenario will help keep your business strong, but it’s also wise to keep checking in and reevaluating whether you’re charging enough to maintain your margins.