Keeping your prices aligned with inflation while protecting your customer base can be done. Here are some top tips for success.
The current economic situation is having a huge impact on businesses as well as consumers. Recent ONS figures indicate that around 18% of trading firms are expecting to increase the price of goods or services they sell.
Balancing the necessity of price increases with the need to retain customers can be challenging.
In this article, we’ll look at:
– How online retailers can best implement price increases
– How to best communicate price increases to customers
– Pitfalls to avoid when increasing retail prices
How online retailers can best implement price increases
There’s never an ideal time to increase prices, but there may come a point when you have no other option. Your business may be able to absorb some increases into your own costs initially, but in order to keep solvent long-term, price increases will eventually need to be passed on to customers in some form.
In order to minimise any potential lost sales or negative reactions from customers, it’s important to determine when – and by how much – to raise prices.
Deciding when to increase your prices
Whatever the deciding factor behind a price increase, it’s important to approach it sensitively. Consider the following:
Look at the last time you increased prices.
Was there any impact on your sales as a result, and if so, for how long? Was the last change a recent one?
Look at your direct competitors.
Have they increased their prices recently? If they haven’t, it doesn’t mean that you shouldn’t, but you might need to approach your customer communications a bit differently if you’re ‘first’ to make a price change.
Look at your customer base.
Are they likely to be able to cover a price increase? Are they loyal to your brand or do they shop around for the best deal?
Look at your product range.
Are there specific products that could support a price rise better than others? For example, are there products that deliver more value to customers than others, that they would likely be willing to pay a little more for?
Deciding how much to increase your prices by
If you’re increasing prices, you’re likely doing so because you need to pass on some of the extra costs that you’re facing as a business. However, you also understand that a significant rise might put potential customers off and send them elsewhere for their purchase.
It’s natural to try and keep the increase down to a minimum. But if you make an insufficient increase now and end up having to raise prices again in the near future, this could potentially do more damage to consumer trust than making a bigger initial increase which means you don’t have to put prices up again for some time.
Understanding your audience and their price sensitivity will help you to see which approach is more suited to your customers in general.
Providing them with alternative methods to pay, such as retail finance, can often mitigate the negative impact of increasing prices. Customers will have access to more payment flexibility that may better suit their monthly budgets, meaning they’re more likely to stick around.
Communicating price rises to customers
Giving existing customers information in advance of a price rise builds trust and transparency – and will usually go down well. Here are some pointers:
– Be honest about why you need to increase prices and explain where your own costs have risen
– Let them know that you understand they are probably undergoing financial pressure too, and you’ve left the price increases for as long as possible due to this
– Outline the value that your products still bring, even after the increase (especially if your new price compares favourably with competitors) to highlight why customers should stick with you.
– Offer ways to help customers spread the cost on bigger ticket items, such as with finance solutions and interest free credit options.
– Give them an opportunity to provide feedback and ask questions about the price increases
– Ensure that your customer services and/or sales teams are fully aware of all of the changes before they go live, and your website and social channels are updated if needed to avoid conflicting information.
Pitfalls to avoid when increasing retail prices
Price rises are a necessary part of sales. However, if done poorly, they can alienate consumers, result in complaints and drive customers away. Here are some things to avoid when increasing your prices:
– Lack of advance warning on price rises, so customers aren’t expecting it and can’t prepare for it in their budget
– Price increases that are hyper-focused on undercutting competitors, rather than the rise being calculated for the specific needs of the business (which may mean further increases are needed in close succession)
– Poor communication with customers about the reasons for the increases, or when marketing channels and staff are not joined up in terms of timing and messaging on this subject.
Increasing prices in a way that is as fair and well-managed as possible can be a tricky challenge for any retailer. But it doesn’t need to have negative results if it’s done in a way which informs and empowers consumers at what may be a challenging time for them.
If you want to find out more about how POS finance in eCommerce can help customers spread the cost of price increases, book a 15-minute demo here.