How to Increase Prices, Effectively & Respectfully
A lot of people are talking about small business price increases at the moment, from Seth Godin, to every business coach you follow (ha!), to the Wall Street Journal. And although I stand behind this statement: most small businesses offer too many products at the wrong prices, I don’t believe that every business should willy-nilly increase their prices across the board.
But here’s one thing I’ve found: even if someone knows they need to make a change to their product mix or pricing, how to enact the change is an entirely additional obstacle to overcome. And there is a generous, win-win way (believe it or not) to increase prices.
Here are 3 ways to make sure your approach is clear, kind, and attracts even more business your way…
1. Add value.
This is another fascinating article in the WSJ about price increases. When I first saw the title I panicked, wondering, “Oh shoot. Is Suzanne Kapner going to tell me that everything I’ve been preaching is wrong?” (For the record, if she is, I do want to hear about it; I need to know points of view that are different than my own). But no, she didn’t. Instead what she said was, if you’re going to increase prices, they’ll be better received if you give the customer more.
But this doesn’t have to mean you’re physically giving a customer more. Increasing value can come in all (tangible and intangible) shapes and sizes. Denise Duffield Thomas suggests…
- making your product more efficient or effective
- upgrading branding or packaging
- enhancing the client experience
Because remember: value is in the eye of the beholder. And if you’re the creator/seller, you’re not the beholder. Therefore, ensure that you’re having intimate customer conversations to understand where they get value from your product.
2. Call your top customers.
This one is scary for many people. I too, must gather and rally myself before making a call about a price increase. The butterflies get the best of all of us, I promise! Here’s the thing though: difficult news is always better received by voice than email. And this is a muscle that can be built with practice.
Here’s why delivering price increases by phone call is so important: your top customers likely account for 80% of your revenue and 150% of your profitability (not a typo). Good business leaders give priority and take care of those who take care of them.
PS – there’s a bonus below to help with this step.
3. Niche down. Increase Prices
Making a price increase is the perfect time to take inventory (literally) of what’s propelling your business and what’s weighing it down. The stat I mentioned above – 80% of revenue and 150% of profitability – is a universal truth of doing business. Everyone thinks, “surely that doesn’t apply to me.” But it applies to alllllllll of us. Prune your products and customer base so that you can focus money, energy, and resources on the business that’s moving you forward.
As Mary Stengel Bentley recently and beautifully attested:
I feel free. I love what I’m doing right now. [In the past] I’ve had so much fear turning down work… Now, I’m boiling down: what’s important to me.
I’ve heard so many people in the past say that they’re scared of being “mean.” But in fact, nothing could be more opposite of the truth. Turning down business to focus on what your business does well, and taking the best care of your top customers, is one of the most generous business acts there is. In fact, we call it the Miracle on 34th Street approach to doing business.
