4 Tips When Notifying Customers of a Price Increase

Last week I received this question from one of my e-class participants:

“I have a customer that I’m selling a specific product to with a very low price.  How can I increase the price without an objection?  Also, if I happen to increase the price on the invoice, should I tell him or stay silent until he finds out?  By the way, this product has been increased by the manufacturer.”

My answer to this question:

When you deliver bad news (a price increase) with the reasoning behind it (higher gas prices, labor costs, etc.) your customers are more likely to accept the increase as inevitable and reasonable. The absence of reasoning will annoy the customer and she will assume you’re just trying to squeeze more money out of your relationship.
Advance Notice

Don’t pull a price increase out of thin air. Give your customers an advanced warning that changes are coming. Include the timeline of when changes will happen.

The best way to handle a price increase

1. Give at least one month’s notice.

Reason:  The customer will appreciate the advance notification and will be more tolerant of the price increase if s/he has received prior notice.  Suddenly increasing prices without any advance notice could destroy any trust you have built.  Some customers may be annoyed to the point that they will take their business elsewhere.

2. Don’t use email, fax or a letter. Instead:   Call and tell the customer about the price increase.

Reason:  Written notification of an increase in price is impersonal and may create the impression that the customer’s business is not important enough for you to take the time to make a phone call.  The personal touch of a telephone call leaves a better impression.

3. Give customers a good a reason when explaining the increase (for instance: your price from the manufacturer was increased.)

Reason:  Customers will be more understanding if you give them a reasonable explanation for the price increase.

4. Give the customer options, like a quantity discount, or an annual agreement, where they would agree to buy a certain quantity of the product during the next year for a specific discount.

If there is enough profit built into the current price the customer is paying, you can offer to lock in the price for a year when the customer purchases an annual agreement.

Caution

When you call to tell your customer about a price increase – if you offer to ship the products today at the current price – make sure customers know it is really YOU calling.  This is a favorite tactic used by fraudulent telemarketers.

Keeping Loyal Customers

Good communication between you and your customers is essential to maintaining customer loyalty.  This becomes crucial when you notify a customer about an increase in price.  The way this is handled can either strengthen or damage customer relationships.

How do you notify customers about a price increase?  I’ll bet you have some good ideas. Please post your comment below.  I would love to hear from you!