Unpleasant, but necessary: informing customers about an impending price increase.those who provide honest and transparent arguments can continue to retain customers.
At some point, you will have to pass on rising costs to your customers. You can limit their displeasure by announcing the price increase in good time, communicating the reasons and consequences as openly as possible and using some marketing tricks.
- Reasons for the price increase
- Announce price increase and offer added value for customers
- Do you have to announce a price increase?
- Prepare the price increase announcement
- Announce the structure of the cover letter for the price increase
- Content and arguments for price increase
- Sample letter for price increases
Reasons for the price increase
The reasons for a price increase can be divided into two groups:
Internal company reasons
Miscalculation or a planned expansion – these are just two examples of operational reasons for a price increase. Even with all due transparency, the first reason would of course not be communicated one-to-one. The second reason, however, promises advantages for customers.
In general, an internal company reason for a price increase should always be linked to increased customer benefits. This also applies to the second category of reasons:
General economic reasons
Natural disasters, (economic) crises, political and military conflicts, epidemics and other events on a global scale can trigger supply bottlenecks and price increases. Short-term fluctuations can be balanced out, but a continuous upward price trend cannot.
As everyone is affected by inflation, there is a certain understanding of price increases. Not much needs to be explained. Nevertheless, it is important to offer customers new benefits at the same time. After all, competitors are also struggling with the same problems and will make corresponding offers to their clientele. In addition, consumers are taking longer to decide which purchases or investments to make. You need good arguments in favour of your own company.
Announce a price increase and offer added value for customers
No matter what the exact reasons are: Nobody is happy about rising prices. You should therefore not only inform your customers about the upcoming price level, but also offer them the prospect of added value. You may have to create this first. Read also Creating added value for customers.
Possible levers for this are:
Can you optimise your offer yourself? Can you improve the quality of your product? It may also be possible to plan a useful addition or accessory as a free gift. The packaging can also be included in the considerations: Could it be more environmentally friendly or more practical?
This is where there are usually the most opportunities to offer customers additional benefits. These can sometimes be small things that cost you little but still have a big impact.
The decisive factor here is what is feasible within the set budget and what sets you apart from the competition. Keep a close eye on the market. What campaigns are your competitors planning, where are there still niches? Possible starting points include:
- Staff: Think with your employees about where more can be done for customers. Sensitise everyone in terms of friendliness and customer orientation, make sure there are fixed contact persons.
- Processes: Make it as easy as possible for your customers to buy your products and utilise your services. This includes multiple ways to contact you, easy ordering of products, warranties, repair and maintenance offers.
- Additional services: Other ways to retain customers despite price increases include reservations, customisation, delivery service and appointment commitments, which B2B customers in particular appreciate for planning security.
Do you have to announce a price increase?
Energy providers, landlords, banks and insurance companies are legally obliged to announce any increase in their prices, fees or contributions. All companies that come into direct contact with their customers are at least advised to point out price increases.
In some sectors, such as the food industry, it is common practice to conceal higher prices. A bar of chocolate may cost the same for years, but instead of weighing 100 grams, it weighs 90 or even less. If everyone plays a similar trick, consumers have no real alternatives. However, this behaviour is still a source of annoyance.
Companies with a small customer base cannot afford this under any circumstances. They are dependent on not scaring off their clientele by increasing prices through the back door. An early announcement is therefore not only fair, but also offers you a platform: you can explain your reasons, which in the best-case scenario will arouse understanding and strengthen trust in your brand. On the other hand, you can communicate the aforementioned added value offers. If possible, offer your customers the opportunity to buy again at the old price.
Prepare the price increase announcement
There are a few things you should bear in mind when planning the letter:
Regular minor price adjustments prevent you from having to raise prices too much. However, external factors that cannot be influenced can sometimes cause business costs to rise to an extraordinary extent. In such cases, however, the entire industry or even the entire economy is usually affected. Consumers are aware of the prevailing price pressure so that they can position themselves in the wake of general price increases.
And when is the exact time for the announcement? Customers should be informed a few weeks before the price increase. B2B customers usually need to be informed much earlier. Take their order cycles and budget planning as a guide.
In order to avoid having to raise prices again in the foreseeable future, you should calculate extremely precisely and calculate various scenarios. If you have price guarantees with a supplier until a certain point in time, you can guarantee your customers a constant price until time X.
Create added value
Check the possibilities in your company and determine how your clientele should be reconciled with the price increase.
Determine the language
Not all customers will tacitly accept the price increase or simply stay away. There may be enquiries, complaints, expressions of displeasure and even insults and other emotional outbursts.
Employees with direct customer contact must know how to justify the price increase and how to respond to objections. They must internalise the official language and be able to calm angry callers or visitors. It’s also never a bad idea to have a few goodies up your sleeve for particularly difficult but valuable customers.
Announce price increases on all channels
In a shop or office with a high footfall, a natural first measure is the notice board on which you inform your customers. Practical are also flyers or postcards to take away. These are particularly useful if they announce a sales date before the price increase or similar.
You should also draw attention to the upcoming price increase at the same time on your homepage, in any newsletters and on your appearances in the social media.
If you have a higher-priced portfolio and/or major customers or B2B customers, you should always announce the upcoming price increase in person. It is best to choose a slightly earlier point in time than the general announcement in all other channels.
Even if the contact is normally digital, an announcement should be made by letter and only additionally by email in order to improve customer loyalty.
Formulating and sending a letter
The cover letter requires a particularly well-planned approach. It forms the centrepiece of the official language policy and thus the announcement in the other channels. Employees should also be able to use it as a guide in order to respond appropriately to customer enquiries. Suggested wording can be found further down in the article.
The price increase announcement should not have an advertising character. This means that the company’s normal letterheads is used, with an appropriate envelope and a stamp affixed.
Structure of the cover letter for announcing a price increase
As in every business letter, the subject line should make it crystal clear what the letter is about. Whether you call the child by its name “price increase” or rather “price adjustment” doesn’t really matter. It is more important to also state the date from which the new prices will apply.
The explanatory text should have a positive bracket. After all, it is well known that what is written at the beginning and end is the most memorable. For example, the first paragraph can refer to the excellent business relationship, the last paragraph can contain a hopeful outlook or concrete offers at the previous prices.
Within this bracket, there is as much space as necessary to explain the reasons and possible effects of the necessary price increase.
In a letter, explain the reason or reasons for the upcoming price increases to your customers as honestly and individually as possible. You do not have to and should apologise for this. However, you may give a small indication of how long you have kept your old prices.
These reasons can be: general price increases for raw materials, production, energy and transport, increase in labour costs, expansion, supply bottlenecks, expansion of services, new legal requirements. The argumentation will be more personal if you briefly describe how these causes affect your company – but without going into too much detail.
If there are macroeconomic reasons, you don’t have to explain as much. In such situations, however, there is usually a climate of uncertainty that leads to consumer restraint. Here it is particularly important to create confidence. You can do this with confident wording at the end of the letter and with offers that meet your customers’ need for security, such as price guarantees for a certain period of time.
This guarantee can be one of the improvements that you promise at the same time as the price increase. As already mentioned, optimised services, product improvements, simplified purchasing and/or ordering processes are also possible. It is important to communicate this clearly in the letter.
You should also be sure to offer a purchase period at the previous price in your letter. This not only boosts overall business and empties the warehouse, but also offers customers a positive incentive. An offer like this speaks of great fairness, which helps to strengthen customer loyalty.
Sample cover letter for price increases
We have formulated price increase letters for various situations. You are welcome to use suitable elements from these.
- 1 Increase in prices for individual product groups
- 2 Price adjustment
- 3 We are increasing prices
Increase in prices for individual product groups as of XX.XX.20XX
Dear Mrs XX,
Thank you for placing your trust in us for the past seven years. During this time, we have managed to keep our prices stable.
Unfortunately, we are now forced to make increases. As the situation on the raw materials market remains tense, the purchase price of metals has almost doubled for us over the years. In order to remain economical, the products in our A and B series will cost you a little more in future. You can find the exact prices in the enclosed list.
But we also have two pieces of good news: The products from the C range will remain as inexpensive as before. You can purchase all other items at the old price up to and including XX.XX.
We have set up a hotline for you on 0xxxx/xxxx to ensure that orders run even more smoothly in future. Try it out right away for your current order.
With kind regards
Price adjustment as of XX.XX.20XX
Dear Mr XX,
You know that you can trust our XB systems and our service. We are pleased that we will be able to offer you even better support from our customer service in the future.
Unfortunately, we have to raise our prices at the same time to compensate for the increased cost of raw materials. Rubber, for example, has risen in price by 30 per cent in recent years, while our supplier’s metal rails have risen by 20 per cent.
Thanks to a mixed calculation, we have succeeded in not passing on the individual price increases to you in full. You will only pay 10 per cent more than before. At the same time, you will benefit from the reorganisation of our customer service.
With a new contract until XX.XX.20XX, we also guarantee you a system at the previous price. If you have any questions, please contact us by e-mail or telephone.
With kind regards
We are increasing prices as of XX.XX.20XX
Dear Mrs X,
With your current order, you will benefit from our sensationally favourable prices and high product quality. If you decide to place another order by XX.XX, you will also still be able to purchase with this price advantage.
From XX.XX onwards, however, we will have to adjust our prices to the level of our competitors. Unfortunately, the general economic situation leaves us no other choice.
We know that this situation is also difficult for you and therefore have a special offer from now on: every month you can order selected products with a discount of 15 per cent. To help you plan, we have enclosed the offers for the next six months.
Of course, we will maintain the high quality. In fact, we are constantly working to improve it. You are welcome to measure us against this promise.
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