How to effectively raise prices

how to effectively raise pricesHow to increase prices and retain customers

Companies raise prices all the time. There are various reasons, explanations, and results. Sometimes companies disclose the changes, but sometimes customers and clients never even catch wind of a change. Let’s have a look at the causes, the perception, and the actions to take.


Usually there’s an impetus for a company to raise prices. Perhaps there’s a business model already in place to raise future prices, but often a price increase is tied to another event. Here are some typical reasons:

Spike in raw material prices used in manufacturing products

Is there dearth of raw materials used to make the products your company is producing? Perhaps there’s a lack of access to the materials due to stalled transportation from inclement weather, natural disaster, drought, etc. Perhaps resources are dwindling or other roadblocks in the supply chain are driving up prices.

Services or products have become incredibly popular (value-based pricing)

Perhaps you realize that your services or products weren’t appropriately priced early on, and you’re realizing your product’s value in the market. You may also need to reduce demand for some time by increasing prices.

Unexpected change in business or a new tact

Perhaps you’ve lost business recently or your business strategy has changed and you need to cover costs by increasing prices. These changes can come with the opening of a new branch or factory, or the launch of new services or products.

Inflation and market trends

It would be nice to keep prices where they started 5, 10, or 20 years ago, but most businesses aren’t sustainable that way. As all prices of other goods and services rise, so too must yours.


As detailed in an article about the power or perception, behavioral economist Richard Thaler ran an experiment in which some study members were asked how much money they would give a friend to go buy beer at a “run-down grocery store”. Some study members were asked to get the alcohol at a “fancy hotel”. According to the article, “the fancy resort’s median price was 71% higher than the run-down store’s price.”

This might suggest that considering the perception of your product or services could be key to your next price adjustment. Considering what your current branding is, who your competitors are, and where you want to see your company could help shift your own perception of your company, and that of others. Aligning the two could be critical to successfully stewarding a price shift.


It’s important thoroughly think through a price adjustment. Considering your own worth is important, but understanding that some clients and customers won’t be convinced can be a hard pill to swallow. To make the change more palatable, or even attractive, you should consider these options:

Consider the tactic (good-value pricing, value-added pricing)

Are you planning on going to offer any promotions or price discounts in the future? Are you going to attach value-added features and services to support the higher prices? Are you considering doing bundles packages? It’s important to answer theses questions so that you can communicate to clients and customers.

Consider timing

Have you recently increased prices? Does it feel too soon to do it again? You could risk loyalty from consumers and clients if price increases come back to back. However some believe that small increases frequently are better than large increases infrequently.

Are you implementing new, improved services or bundling new packages? An announcement tied to value increase or product change can be more comfortable for consumers and clients.

Make a solid announcement

Most people feel it is best to announce an increase, especially to current customers and channel partners, rather than try to hide the increase. People don’t want to feel fooled or ignored. They want transparency.

Understand that wording is critical

Being direct and confident in expressing the increase is the best tact. Remember that if you value your product and services, your customers and clients are more likely to as well.

Although you’re briefly sharing the reason for the increase, don’t feel the need to disclose sensitive financial information.

Lastly, provide clear timing on the changes and be sure that changes don’t violate any pre-existing agreements.

Although some customers and clients may bristle at an increase of prices, if you’ve been playing fairly and providing solid products and services, many loyal customers will come along for the ride. If you value yourself, and others value you, you can survive a price increase. You may even thrive from one.

Fronetics Strategic Advisors is a leading management consulting firm. Our firm works with companies to identify and execute strategies for growth and value creation.

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