For many business owners, no matter how much they desire to improve their pricing, it’s something they approach with the greatest caution or outrightly dread doing. This is understandable because a large percentage of customers react negatively to price increments. While some diehard lovers of your product may buy lesser quantities than they used to, others may simply get mad – especially if they feel the increment is unjustified – and go look for competing alternatives.
With this in mind, how do you communicate price to your customers without making them angry and losing them to the competition? Ideally, before you even settle on a new price, the first thing to do is calculate the willingness to pay (WTP) of the users of your product.
The willingness to pay is the maximum amount a customer will willingly pay for your product or service. It is commonly expressed as a range rather than a single number since you’re dealing with different types of people with varying financial strengths. So, having calculated your customers’ WTP and you’ve arrived at the prices you want to charge, here is how you go about passing the news to customers and still keep them sweet and happy.
9 Ways You Can Communicate Price to Customers
1. Talk to customers, don’t send an email
Especially in cases where the price change you want to communicate across is an increment, it is advisable you talk to your customers rather than send an email. You do this either by talking to them in person and if this is not possible, then call them on the phone. Not only does it show consideration, but it also indicates you value their patronage. For big retailers with hundreds of customers, talking one-on-one with customers may not be feasible. So, in this case, it’s okay if they go the email route.
2. Explain clearly the reason for the change in price
When the market is shrinking, a company might decide to lower prices to attract customers. Lower prices might bring in new customers, but it may cause the company to lose a greater number of sales. Are you wondering how? Well, the reason is this: Customers who were aware of what the brand charged in the past may start to doubt the quality of the cheaper goods. That is why whether you are increasing or reducing price, always let customers know why and reassure them that the quality remains unchanged. If producing larger volumes or using faster and better machinery is making you sell at a reduced price, that’s what your explanation should be. If rising labour or other production costs are responsible for the new higher price, tell that to buyers.
3. Increase the value of your product or service
One of the most effective ways to make customers feel better and willingly pay for a higher price is to add more value to your product. The value could take the form of additional features, an add-on service, follow-up support, or an extended guarantee. Mind you, whatever extra value you provide has to be relevant to the customer.
4. Provide a lower-priced option
The reality is that as much as some customers who love your product may want to maintain patronage, they just can’t afford your new high prices. For this group, the best way to keep them is to offer lesser-priced options. Another good of having a lesser-priced option is that it shows fairness and shifts buyers’ focus from price to value. Fairness in the sense that the product with the greater functionality and the product with the lesser features have prices that reflect their respective value.
5. Give customers enough time
We are all consumers, and we know how unpleasant it is for higher prices to be sprung on us without advance warning. Especially for companies selling to other businesses, many of their customers are working within a budget. So, any surprise price increase will definitely disrupt their plan and make them execute a fast about-turn to the competitor. Even consumers too have a budget, and springing a new price on them without warning is not only inconsiderate but could disrupt their plans.
6. Reward longtime customers for their past business
Show existing customers some love and appreciation by holding off on the price increase for a specified duration even as you implement it for others. For example, say you give all current customers a month or two to prepare for the new prices. For longtime customers, bulk buyers, or customers you have a long-term contract with, you may extend it to three months.
7. Make room for big customers to negotiate
The fact is there are some customers or clients whose patronage contributes a huge chunk to the revenue of a business. If you have such customers, it would be wise to leave room for them to negotiate on the price or rate you would specially offer them. However, let them know the terms they would agree to for the lower margin you’ll incur to benefit your business. Depending on which of these factors is beneficial to you, you could ask them to
- commit to a larger order
- pay earlier or faster
- increase the length of their contract
- give referrals
8. Encourage customers to contact you if they have any questions
You’ve passed your message across to customers and tried to make it as clear as possible. Even with this, there still could be things some customers may be unclear about. By inviting them to come to share with you their questions, you may be able to allay some of their concerns and make them stay with your company.
This Article is part of our Product Life Cycle Series
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