5 helpful tips on how to cleverly implement a price increase
Confidently announcing a price increase without losing customers – how is that possible? And when is actually the right time for it? Confident communication outward goes far beyond simply writing an information letter to customers or similar. It requires excellent preparation and tactfulness if you want to cleverly announce your price increase. Here are 5 briefly summarized and proven tips and strategies to help you proceed cleverly in order not to upset or lose customers.
Pricing Strategy Tip #1: Calculate scenarios
Probably the main reason why many companies refrain from price increases is fear. Fear of losing revenue and orders and losing customers. It is important to know your limits. How much revenue can you afford to lose if you announce a price increase and still want to achieve the same contribution margin as before? This can easily be determined with simplified calculation models. Even if the results are not exact, this guideline is very helpful. It allows you to better assess the likelihood of your losses. Often, the calculations yield values that you consider very unlikely to occur. This in turn gives you the security and confidence you need for a successful price increase. Because even if you lose customers and revenue, you can still benefit from raising your prices.
Pricing Strategy Tip #2: Professionally prepare price increases
"Good preparation is half the battle." – And in this case, this quote is fully applicable. Especially your sales staff should be well prepared to be able to respond appropriately to customer price objections. It is usually the same arguments that can be easily refuted with good preparation. In the second step, your sales staff should be trained to actively use the price changes, for example for possible additional sales. There is a lot of potential here. You shouldn't miss out on that. Above all, salespeople must be convinced of this when announcing a price increase. Good preparation goes far beyond communicating the new prices to your sales team. It is helpful to define specific goals for the customer conversation and to know your negotiation scope. These can go beyond the price. It doesn't always have to be the price negotiated.
Pricing Strategy Tip #3: Consider the right timing
For the customer to accept your price increase, the right timing is crucial. In addition to the time of year, a number of other circumstances, conditions, and occasions play a major role. If the major media report that price increases are expected in the market, your costs are rising, or competitors have already increased prices, you should also take this opportunity for price adjustments. Get your customers used to regular price increases. It is much easier to enforce small price increases from time to time than to suddenly announce a large one. Consciously include price increases in your pricing management strategy.
Pricing Strategy Tip #4: Utilize psychological price thresholds
Psychological price thresholds are a very profitable tool for price optimization within your price management. Perhaps it makes no difference to the customer whether the product costs €27 or after the price change €29. But for you, there is a 7.4% increase in margins. Consider this important aspect when announcing a price increase. It is worth conducting a price analysis and searching your price lists for unused leeway. Used cleverly, this type of price increase will help you achieve more profit in the long run.
Pricing Strategy Tip #5: Set negative expectations
Let's be honest. Salespeople are often accused of promising a lot and delivering little. Accordingly, positive customer expectations are raised and then disappointed. How about turning the tables and spreading negative expectations that turn out to be less bad for the customer? Deliberately and early on, raise negative expectations regarding a planned price increase, only orally and informally in customer conversations, and thus set a negative anchor. Provide the customer with a rough guideline that is above the planned price change. Depending on the customer's reaction, you can adjust the planned price increase more or less and pleasantly surprise the customer. This is a very effective tool when announcing a price increase. Have the courage to carry out your price increase. Of course, there are many more useful tips and strategies on how to announce and successfully implement a price increase. In general, announcing your price increase is especially relevant when customers are familiar with your prices. If that is not the case, then you should not wake sleeping dogs and simply raise your prices. Achieving higher prices is a key success factor and at the same time one of the biggest challenges for most companies. I wish you success in implementing the strategies presented here!
