• How To Raise Prices Without Losing Customers

How to Increase Prices without Losing Customers

It’s a sometimes unpleasant fact of being in business: from time to time, you’re likely to need to raise the prices you charge for your goods or services. The potential reasons are endless in their variety. You may have to pay your employees more, the cost of your raw materials may have increased, or the prices you pay for rent, utilities, or other services may have skyrocketed. Regardless of the underlying reason, you now have a painful problem: how can you raise your prices without losing your customers?

How to Increase Prices without Losing Customers

8 Tips for Raising Prices Honestly and Effectively

1. Clearly Communicate the Price Change

It is absolutely critical that you communicate clearly about your decision to your customers. There are two equal and opposite mistakes that many business owners make at this juncture. They either:

  • Apologize for raising prices, which can open the door for negotiations, or they
  • Attempt to disguise or sneak the price increases under customers’ radar, which insults customers’ intelligence.

This also conveys the message that your business doesn’t think its products and services are worth the new rate. Both of these mistakes are equally as detrimental to your relationship with your customers.

2. Explain the Reason for the Price Increase

Straightforwardly tell your customers why your prices have to go up. By giving them inside information about your business, you signal that you trust them and you respect their judgment enough to communicate directly with them. Note that this only applies if your price increase is in fact justified by the facts on the ground.

3. Consider Your Timing

The timing of a price increase is crucial to your customers’ acceptance of the situation. If at all possible, work to inform customers of a price increase at a time when they are deeply satisfied with what you do for them. You want your customers to see your increase and say “You know what, they’re still a great value for the money!”

4. Nibble at the Margins

The candy bar industry is infamous for raising prices, then shrinking the size of the product delivered for that same price, then later raising the price again in an endless cycle. This is a cynical attempt to disguise half of the price increases in the hopes that customers won’t notice that their favorite candy lost 10% of its size.

This strategy comes across as sneaky when it’s detected, and it’s usually detected. However, the underlying idea may have some merit as a way to cut your costs while keeping your customers just as satisfied, which is the functional equivalent of a price increase. If your market research finds that your customers usually use 9 ounces of your 10-ounce product before it becomes stale and is discarded, then you can shrink the product to 9 ounces for the same price, give your customers what they’ve been using, and even tell them why you’re doing it. By presenting this as a win-win scenario (“You still get as much use from the product as you ever did, and we don’t have to raise our price.”), you can keep your customers satisfied with the change even though they are getting less on paper.

5. Add a Fee

One way to gain incremental revenue without necessarily changing the price psychology of the product is to add a fee or surcharge for a specific reason. Again, this works best when you have an objective cost to show your customers, and they don’t feel like you are taking unfair advantage of the situation to up your rates. Another advantage of an added fee is that if the new cost changes or disappears, you can change or remove your fee as well, thus showing your customers that you are responsive to their price sensitivity.

6. Improve the Quality (or the Delivery or the Service Level)

If you have to raise your prices, one way to soften the blow is to improve the quality of the underlying product, or the service level associated with the product. For example, if you have to raise your prices 15% to compensate for a new expense, you might instead raise the price 25% and use the additional revenue to use better ingredients, or provide better customer service when you deliver the product.

Both levels of price increase are about as difficult to sell to your customers, and the 25% increase comes with an improvement to what the customer receives. It is important to make sure that the quality improvements go into areas that the customers value, however. If everyone is happy with your ten-minute wait time, then raising the price and cutting the wait time to one minute is a net loss for your customers.

7. Reward Loyalty

Research and real-world experience each confirm that customers want to feel valued by the people they do business with. You can signal to your customers that you value them, and thus soften the blow of a price increase, by informing them that because of their past commitment to your business, you are going to delay the price increase that your other customers have to face for a period of time such as six months or a year. When that discount window expires, you can raise the price and your loyal customers will have already mentally adjusted to the new price.

8. Be Replacement-Ready

Reality check: some customers are more price-sensitive than others, and there are some people using your product or service who can just barely afford to do so. When you raise your price, no strategy or approach in the world can stop at least some of those customers from going elsewhere.

However, there’s a silver lining to this cloud: some customers are less price-sensitive than others, and there are some people who formerly didn’t consider your product or service because they thought it was a little low-budget for their needs. Those people are now more willing to look at what you have to offer than they were back when it was cheaper.

By being aware of this shifting window of potential customers, you can be ready with your marketing strategy to attract new customers to replace those that you might end up losing with your price increase.


Your relationship with your customers is of utmost importance. Gain even more insight into this part of your business with our free eBook below:
Kristen McCormick
Kristen McCormick
Kristen is the Content Marketing Manager for ThriveHive, where she geeks out daily over SEO, organic traffic, and A/B testing. When she's not equipping business owners and marketers to get their name out there through effective content, she's out pedaling the streets of Boston on her beloved bike.

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