Chalk it up to inflation. Or maybe increased competition has left you with no other option. Whatever your reason — and we’re sure it’s a damn good one — you have to raise your prices. Just don’t share the whole truth with your customers.
That’s the advice of Grant Cardone, serial entrepreneur and best-selling author. In an article for Entrepreneur.com, Cardone (@GrantCardone) says customers will accept price increases, but they don’t want to hear excuses.
So, how do you tell customers that they’ll have to pay more for your products or services, without sheepishly pointing at economic or industrial data they just don’t care about? Here are four rules of thumb:
1. Tell them what they stand to gain.
“Explain the reasons that [the increase will] benefit the customer: added content, additional service, or support,” Cardone writes. “It could be something new or something you haven’t been telling your clients you do for them.” In an interview with Build, Cardone offers up Kraft Foods as an example of a business that does this well. Kraft has raised prices on Nabisco Oreo cookies several times, but it has also added products, such as the Double Stuf variety, he says. Customers are less likely to complain when they’re getting twice as much of the product’s signature cream filling.
2. Show your worth.
Along similar lines, pricing-strategy expert Rafi Mohammed writes in an HBR Blog Network post: “Make it a point to reinforce that even with the price increase, your product or service is still a great deal. Even with a higher price, for instance, Netflix is usually cheaper and arguably a more robust service than HBO.”
3. Play favorites.
In an Inc. column, sales consultant Tom Searcy suggests that it’s important to let your biggest clients and customers know about the increase early to soften the blow. “It’s a mistake to let them get the news through an email or a salesperson,” Searcy writes. “A price increase, even if understandable, is still going to be seen as bad news — so it should be communicated executive to executive, not couriered by frontline people.”
4. Be flexible.
“No one likes being cornered with a ‘take it or leave it’ ultimatum,” Mohammed writes. “A price increase is more palatable if there is an option to save money. Even if you don’t expect anyone to take the cheaper option, offer it anyway. Consumers appreciate choices.” Mohammed goes on to suggest that offering “silver” or “gold” product packages with increased offerings to the customer may work better than offering an across-the-board price hike.
Meanwhile, Cardone suggests that businesses that sell on a contract basis may find it advantageous to let customers pay the existing price — if they agree to a longer-term commitment. “The only clients you need to be concerned about are those who object to the higher prices,” he says. “For example, we heard: ‘Last year I paid only $1,500 and signed for only 12 months.’ Our response? ‘Great, and that is why we are still offering that pricing to you while increasing new content and additional support. By going with the 24 months, you can maintain your old pricing.’”
Even if you don’t need to increase prices, Norm Brodsky’s classic Inc. piece, “The Case for Higher Prices,” presents plenty of reasons to do so, such as maintaining your brand image. “By not raising prices on a regular basis,” he asserts, “…you’re gradually undermining the perceived value of your services or products. Like it or not, there’s a natural tendency to link quality and price. I’m not saying you always have to charge as much as the most expensive suppliers, but if the gap between your prices and theirs gets too large, customers will start to regard you as the cheap alternative in the market.”