Small business owners often open the books and find surprising numbers. As the economy grows turbulent, customers are exercising caution over their spending like never before. Simultaneously, many companies face rising cost of goods associated with inflation and skyrocketing fuel prices.
Raising prices at a time like this is a daunting task. On the one hand, business owners want to ensure that their steady client base remains intact. On the other hand, rising costs of overhead suggest that the only solution is raising prices. Small businesses may have to start raising prices just to keep the doors open.
However, there is more than one way to approach pricing changes. How to raise prices is on the minds of many small business owners, and the following suggestions can make for a smooth transition:
Raise prices in conjunction with another unique initiative.
When price increases take place as a stand-alone event, it can be shocking and detrimental to the business. Do you have a new product or service idea that could be implemented right alongside an increase in prices? This is a demonstration to customers that they are getting not only an increase in the price tag, but an increase in value in products or service offerings on your end. It is a testament to a business that is willing to offer more value to their customers.
Change the volume.
If you sell physical products, you may be able to change the volume, while keeping your prices the same. Many restaurants are serving smaller portion sizes due to rising food costs, but changing the volume allows them to keep their menu prices the same. Could you include two widgets in a package instead of three? Consider ways to slim down the volume, which may be less noticeable to consumers than a price change.
Downplay price increases in your pricing model.
If you are in a service industry, raising prices might be a little easier because you can hide the increases in your pricing model. For example, the hourly rate for a service may need to go up, but you can mask the change by simply allotting more hours for certain services. This might not be the most effective way to approach raising prices, but it minimizes shock and resistance from your customers.
Show key customers your case.
If you have a core group of customers that contribute to the success of your small business, it might be worthwhile to just open up your ledgers and let them see the problem in print. Raising prices isn’t just about making money; it’s actually about making ends meet while still offering high-quality service and products to others. Customers will be more likely to understand and empathize with your plight if they can see where changes in the economy have impacted your business operations. You might also consider taking input from them on how to raise prices in a manner that will be more conducive to their unique needs.
As you can see, raising prices is not a clear cut process. There is a high degree of tact and diplomacy that go hand-in-hand with it. Learning how to raise prices is a fundamental part of owning and operating a business. You may need to exercise some creative thinking in order to get the job done without driving customers away. The key is to plan carefully for how to raise prices, and then implement the plan over time rather than overnight. A slow and steady process of raising prices is better than a sudden transformation.