Raising prices for your services can be a difficult decision to make – but it is often necessary in order to sustain and grow your business. On the one hand, you want to ensure that your business is financially viable. On the other hand, you want to remain competitive and, at the same time, avoid alienating your customers or pricing yourself out of the market.
Raising prices is not necessarily customer-unfriendly. If you have improved your services, it’s only reasonable to ask for a premium price. However, it’s a question of communicating the price increase so that the customer sees their benefit as well.
So, let’s take a look at the bigger picture of why you might want to raise prices for your services. We have also included a useful email template to help you reach out to your customers in case you find yourself in this situation.
Common reasons why you might want to raise your prices
Various complex factors may lead you to increase prices for your products or services – let’s look at some of the most common reasons.
- Improved services or products. If you have made significant improvements to your services or products, you can justify a price increase. Your customers should pay more for higher-quality or more feature-rich services. However, in order to justify the price increase, it’s crucial to communicate the added value of the improvements to your customers. Make sure to highlight the benefits of any new features or the improved quality of your products.
- Increased labor costs. If you have to pay your employees more (for example, due to salary negotiations), you should raise your prices to cover the additional labor costs. Remember that paying your employees a competitive wage is essential for attracting and retaining top talent – and it’s only natural to pass on some of the additional costs to your customers in order to stay competitive and reflect the high value of your services.
- Inflation. In 2022, due to a combination of factors, most of the world saw a high inflation rate. If the cost of the materials or supplies you use to provide your services has increased, you may need to raise your prices to cover the additional expense. It’s unfortunate, but almost everyone has been affected by the increased cost of living, which translates to an increased cost of doing business.
- Increased demand. If demand for your services has increased (due to a growing market and/or popularity of your business), you can use it to your advantage and raise your prices. Is there a strong demand for your type of services or products and not much competition? If so, you probably have some room to raise your prices.
- Competition. If other companies offering similar services or products are raising their prices, you can do the same in order to remain competitive. However, it’s important to remember that simply matching your competitors’ prices may not be the best strategy. Instead, consider the value you offer and whether or not you can justify a higher price based on it. It’s not a bad idea to differentiate your business from other competitors by offering a higher level of service or more unique products.
A decision to increase prices will likely involve a combination of these factors and your own business goals. As a rule, it’s important to consider the competition and the potential impact on your customers.
Sometimes, raising prices is the best route if you want to grow and expand your business. The question is: how can you communicate this decision to your customers without the risk of alienating them?
How to tell customers you’re raising your prices without scaring them away
A decision to raise your prices is not necessarily a contentious issue. Global economic trends beyond your control might dictate it, or it might be a fair reflection of the improved quality of your services and/or products.
In any case, it’s a question of communicating it to your customers so that they feel empowered rather than alienated. Be honest and transparent about your decision and emphasize the high level of services your customers will receive in exchange for the premium.
Here are some tips for communicating the decision to raise prices to your customers:
- Emphasize the premium value of your services. Consider what you can do to add value for your customers in exchange for the price increase. This could be new or improved products or services, additional perks or discounts, or improved customer service. The idea is to make your customers feel that they are getting a good deal despite the price increase. You want to emphasize that your services warrant the increased price tag.
- Explain your reasoning. It’s important to be transparent with your customers about why you’re raising your prices. Explain the reasons that have led to the decision, such as increased costs or changes in the global market. You should let your customers understand that the decision is not arbitrary and not taken lightly. Remember that your goal is to maintain trust and credibility with your existing customers.
- Timely and active communication. Don’t wait until the last minute to inform your customers about a price increase. Customers will not appreciate it if you come out of the blue with this kind of information. Communicate the change as far in advance as possible, so they have time to mentally prepare. Depending on the kind of business you do, consider the best means of communication, such as emails, social media posts, or in-person conversations.
After you have communicated the message to your customers, be sure to follow up to see how they are doing in order to address any concerns or questions. You want to ensure that your customers feel valued and supported.
By following these tips, you can minimize the risk of alienating your customers. In the short term, customers might resent your choice to raise prices. However, communicating this decision in a timely and transparent manner will go a long way. Remember that in the process of raising prices, you can still prove commitment to your customers.
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How to inform your customers about a price increase: an email template
If you are planning to raise prices for your services, there is a good chance that you will reach out to your customer via email. To help you with that, we have created an email template, which can be adjusted depending on your specific business context.
Hi [customer name],
As the new year is approaching, we’re revisiting our services and the value they offer to you.
Over the past year, [we’ve been able to grow our team, increase our capacity, and/or develop new competencies].
In order to maintain our high standard of services, we’ll be raising our prices to [price] on [date].
After careful consideration, we have come to realize that this is necessary in order to sustain and grow our business.
We’re excited to make this step forward together with you, and we believe that our strengthened capabilities can offer unparalleled opportunities to our customers. This is your chance to come along on a new and exciting journey together with us.
If you have any questions or concerns about this, please do not hesitate to contact us. We will be happy to discuss this further.
Thank you for your continued support!
Sincerely, [your name]
Raising prices for your services is probably inevitable at some point. Whether due to the ebb and flow of the global economy, driven by competition, or the realization that you have raised the bar of your services, it’s a natural part of your business development and growth journey.
The best way to communicate this to your customers is straightforward – don’t beat around the bush and tell them, as far in advance as possible, that you are raising your prices in order to sustain and develop your business. Let them know that you appreciate their loyalty, and they can look forward to even better services in the future.
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