Price hikes get the message across

If you are looking to announce a price increase, it’s important to test the market first with a few customers by telephone or face-to-face, to gauge reaction.

As Barry Franklin, an adviser for Business Link for London explains, how you approach the subject of price increases will very much depend upon the type of product/service you are dealing with and its demand.

“Think about why prices are increasing. Are you sure youÂ’ve done your sums right? Could administration or operational cost savings be made through greater efficiency, less waste, better management or more effective buying, for example?” counsels Franklin.

He suggests that a good approach when informing customers of price increases is to be friendly – try to write as you would talk to your customers.

“Do not be too formal, for example, starting with ‘we hereby give notice…’ may not warm customers to you. Above all, keep your message short and attach a new price list,” suggests Franklin.

You could also, he adds, use an increase in costs as an opportunity to start a promotion, for example you could use the following: ‘Prices go up next month, but all orders received before (a certain date) will be invoiced at the old price.’

“Have you any stock you want to clear out and sell at specially reduced offer prices, if bought before a certain date? This will help sweeten the pill,” explains Franklin.

Ricksons Solicitors suggest that you may want to start with the following wording in a letter.

‘Whilst we have endeavoured to maintain prices as low as possible for our customers, we write to inform you that as from [date] we have no alternative but to increase our prices for [goods/services] as detailed on the attached schedule. This reflects changes in costs, which have been incurred by us [or alternative reason as appropriate]. The price increase does [or does not] include VAT.’

You may also want to follow this up with a sentence such as the following, as Business Link for London’s Franklin suggests.

‘You will see, from our new price list, attached, that we have tried to keep changes to a minimum so as to avoid any adverse impact on your present sales levels.’

It’s important to put a logical reason for your new price levels and not to make excuses or use too much jargon, unless you are sure your customers will understand it.

“Use simple, everyday language, remember to thank customers for their past business and don’t forget to ask for their future support,” adds Franklin.

You could end your letter in the following way, as Ricksons Solicitors suggest: ‘If you have any queries with the content of this letter, please feel free to contact us and we will assist you.’

See also: Getting your prices right in five steps

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