Angie Henson - October 19, 2023

How (and When) to Tell Customers About a Price Increase

Raising prices can be intimidating, but it doesn’t have to be.

Telling your customers about a price increase can be nerve-racking. How will they react? Will raising prices cause you to lose business?

In this article we’ll share strategies to make telling customers about price increases feel less daunting. Below, we’ll discuss:

  • How and when to inform your customers about a price increase
  • Key components of a smooth price increase communication
  • How to justify higher prices
  • Strategies for raising prices while keeping customers onboard

Don’t let a fear of alienating your customer base keep your business from growing. Not only will the information provided help you navigate this tricky situation with ease, it will also provide guidance for managing existing customer relationships.

The importance of a price increase

As a business owner, deciding to implement a price increase can be scary. However, it’s often a necessary step to sustain or accelerate the growth and profitability of your company.

Raising prices can come with a host of benefits and even increase your competitiveness. Price increases offer:

  • A way to reinvest revenue back into the business and improve the quality of products/services.
  • An opportunity to reach new customers who are willing to pay higher prices for superior offerings.
  • The ability to redirect resources from customer acquisition and retention to other areas of your business that require additional focus.
  • Increased flexibility.

Companies like Amazon and Netflix are constantly tinkering with prices to optimize financial performance and sales. Why shouldn’t you?

Assessing the market and competition

Understanding market conditions and your competition will help you determine the optimal time and amount to increase prices. Consider factors such as current demand, market trends, and the overall economic climate when analyzing the market. Typically, companies should consider a price increase every six to nine months.

After looking into the market, examine the competition and their pricing strategies. You can do this by researching their different pricing tiers, promotional offers, and discounts. Try to gain a deeper understanding of their value proposition and what price points are successful. This analysis might help you see opportunities for growth.

Finally, remember to gather customer feedback and use it to inform your pricing strategy. Understanding customer needs, preferences, and perceptions will help you make more informed decisions about pricing your products and services.

Strategies for raising prices

Although raising prices can feel intimidating, there are a few strategies that can help you create win-win situations.

  • One strategy is to implement gradual price increases instead of shocking customers with a sudden jump.
  • Another is to bundle products or services to create a greater perceived value for the customer.
  • Introducing new pricing tiers is another tactic to consider, giving customers the option to upgrade for additional benefits.

It’s critical to communicate the additional value that customers will receive with these changes, whether it’s higher quality products, improved services, or added conveniences. With the right approach, raising prices can help your business thrive in the long run.

Writing and sending a price increase letter or email

One of the most challenging tasks for any business owner is communicating a price increase to their customers. Whether it’s due to market conditions, internal costs, or simply the desire to improve your margins, it’s natural to feel apprehensive about how to convey this message.

Remember, effective communication is key to any successful business relationship, and a well-crafted price increase message can help you communicate your message with clarity and compassion. Mention how you value their business and be as transparent as possible about the reasons behind the increase. Highlighting your commitment to the value of your product or service and offering a grace period can go a long way toward building customer trust and understanding. For example, in your letter you could refer to:

  • Increasing costs of labor or materials
  • A drive to attract and maintain the best talent
  • A general increase in operating costs

With some thoughtful planning and a little empathy, you can write a clear and concise price increase letter or email that will help you maintain a positive relationship with your customers.

Finally, be sure to follow up with your customers after sending the price increase notice, offering to answer any questions or work to find creative solutions for customers facing financial strain due to the increase.

Maintaining customer loyalty

Repeat and loyal customers are essential to any successful business, so it’s normal to be concerned that a price increase would challenge their loyalty.

Fortunately, there are strategies you can use to help retain customers despite the change. Offering discounts, loyalty programs, or other incentives can go a long way in showing customers their value and your appreciation.

Excellent customer service and communication is also crucial for maintaining trust and loyalty. For example, providing a platform for customer feedback and taking it seriously can make customers feel heard and valued while also improving the business and product offerings. Although price matters, it’s rarely the most critical criteria. By implementing these strategies, you can retain customers and build lasting relationships with them, ultimately leading to increased revenue and success.

Measuring the success of a price increase

Price increases are a standard aspect of doing business in today’s competitive market. But how should you measure the success of a price increase? Tracking and analyzing key performance indicators (KPIs) and other metrics will help you evaluate the effectiveness of a pricing strategy.

Set a baseline before you change prices, then carefully monitor the relevant KPIs like:

  • Sales volume
  • Revenue growth
  • Customer acquisition and retention rates
  • Gross profit margin

These will help you make informed, data-driven decisions about the success of your price increase, enabling you to achieve strategic objectives while maintaining customer loyalty and profitability.


How often should I raise my prices?

Many businesses find success raising prices every six to nine months, although this varies based on the industry you’re in and the services or products you’re selling.

How do I determine the right amount to increase my prices?

Pricing is often about striking the right balance between maximizing profitability and maintaining customer satisfaction. Consider overall market dynamics, your cost structure (and that of your competitors), and your overall value proposition.

What if I lose customers after a price increase?

While some customers may choose to leave due to a price increase, clear communication, continuous improvement, and adding additional value can encourage most of them to stick around.

How can I communicate the price increase to my customers effectively?

Transparently share the reasons behind the price increase to your customers. Help them understand any underlying factors such as rising costs or improvements in product quality. By explaining the value they will receive, you can minimize their resistance to the price change.

What are some best practices for customer retention after a price increase?
  • Clearly and transparently communicate the value your company provides.
  • Offer flexible pricing options and allow customers to segment themselves based on the level of service and value they need from you.
  • Enhance customer support
  • Provide loyalty programs while leveraging data and analytics.
  • Build strong relationships by continuously engaging with customers while asking for and acting on feedback.


Tags: Business Growth Business Leadership

  1. About the Author:

  2. About the Author:

    As a Principal at Valesco, Angie Henson serves in key roles related to new investment origination, portfolio management, and investor relations. She directs the firm’s strategic acquisition planning and program management as acting head of research and business development operations since 2002. Angie holds a Bachelor of Science from Tarleton State University and a certificate in entrepreneurial studies from Southern Methodist University.

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