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Key things to consider when contemplating increasing your prices

With inflation picking up significantly largely due to global factors and the cost of living increasing as a result, cash flow and overarching costs are front of mind for small business owners. Eventually you’ll need to bite the bullet and advise your customers of a price rise remembering most customers expect that the cost of their popular products won’t remain the same forever.

Before you put up your prices, you should look for other ways to cover the cost of the increasing goods or products your business is having to cover. This is done through an annual review of your business expenses which includes things such as insurance, your suppliers, products you’re offering and also your EFTPOS provider.

Smartpay has a Zero Cost EFTPOS solution that allows you to automatically pass on your transaction fees so you get to save on EFTPOS bill – putting the savings back into your business to help prevent a price rise for your customers!

While increasing the prices of your goods and services can be worrying, it is also essential for business growth and in some instances, keeping you afloat. If you do decide to increase your prices, how do you ensure their loyalty doesn’t disappear? We’ve outlined 4 tips below.

1. Be transparent & upfront

The clearer you are with your customers, the less potential there will be for any misunderstanding. If you have to raise prices, there’s no need to be apologetic as this will only confuse your customers about the intent of the increase. Being direct will  increase customer trust and decrease their frustration after the announcement of a price change and also help with your communication strategy. When communicating, get to the point where you justify and explain what value you will be able to bring to the customer’s future experience with the price rise and why it was necessary for your business; they will understand.

2. Give reasons for the price increase

To make it clear that you’re raising the prices, you should explain what caused the price increase in the first place. For instance, product production may have become expensive or supply chain costs may be increased. Being honest about your reasons will give your customers the knowledge to understand.

Some common reasons for a price increase include:

  • Increased production costs or prices of materials
  • New services or product options
  • Changes in operating costs such as increases in hires

Such reasoning makes it clear to the customer that you’re not just after profits, but are merely responding to the market environment.

3. Choose the right time and channel

Giving your customers notice way in advance is key, whether this is weeks, months or even a year. Don’t increase your prices overnight but instead provide your customer base with plenty of time to come to terms with the price increase as they may need to alter their personal budgets as well. A good time to consider raising prices is at the beginning of the financial year or even after a sales period (EOFY sales or Dec/Jan sales) but this doesn’t always have to be the case. It is good to note that increasing prices slowly over time rather than in one big bang is likely to retain customers but It’s not only choosing the right time for the customer but also your business needs.

Another factor is the channel in which you advise them of the price increase. Remember, you are a real person communicating with other people, so don’t strip your communications of humanity whilst still being transparent and upfront in your messaging. Show the human side of your business by offering to answer any questions and also consider having a conversation with your customers around the price rise. This will show them a sense of appreciation, which can help you build relationships with your customer base.

4. It’s all about value

If you offer your customers an experience they value, they’re less likely to worry about a price increase. Instead they’re taking note of the service or quality goods they are receiving which is only increasing customer loyalty. Focus on the benefits of your service or emphasise product quality and improvements and the value your customer is getting because of the price rise which is only going to enhance.

It’s also important to talk to your customers and get their feedback. By engaging them you are likely to understand their expectations around the prices they are willing to pay for your goods or services. If there is no pushback from your customer base on your increase, you might have been undervaluing your business to begin with.

There are ways to increase your prices without losing your valued customers to the competition, you just need to ensure they know why you are charging more and the value they will be receiving as a result. Being transparent, communicating through the right channel and with enough notice will ensure to keep customers on the right side of happy. Or alternatively, look at ways to save costs in your business, like your EFTPOS provider, and don’t put them up at all!

Want to know more about surcharging?

If you’re keen to learn more about how surcharging on EFTPOS works, or what you could save, find out more about SmartCharge. To talk about how surcharging could work for your business get in touch with the team at Smartpay.