How to Raise Your Prices Without Driving Away Customers

Advance warning and added value can offset irritation over price hikes.
If you must pass on costs to your customers, avoid raising prices more than once every four months. (Photo: MintImages/Shutterstock)

As a new business, you might have set low prices on your products and services in effort to attract your first customers. But over time, your store has started to feel the pressure of the rising costs of doing business. Labor’s gone up, suppliers have been charging more, and overhead certainly hasn’t gone down. You need to pass some of those extra costs onto your customers to stay in business.

But how can you ask customers to pay more without driving them away?

You’ll need to approach the price hike with tact, empathy and clever merchandising strategies, said Bruce Sanders, consumer psychologist and author of “Retailer’s Edge: Boost Profits Using Shopper Psychology.” Here he shares tips for implementing a price hike without enraging your shoppers.

Don’t surprise customers

No one likes a surprise, especially when it’s going to cost something. The best way to keep customers calm is by warning them before the new prices kick in, said Sanders.

“There’s certainly the risk they’ll then start looking for other sources for the products or services they’ve been purchasing from you. But there’s also the opportunity for you to boost sales and book profits sooner if customers decide to stock up or order in advance before the cost rises.”

Communicate the price hike in whatever way your customers are used to hearing from you, whether that’s email, social media or even in person at the point of sale, said Sanders.

Point out alternatives

A price increase might put a product out of reach for some people’s budgets. Direct them to alternative merchandise that offers similar features, but doesn’t cost as much, advised Sanders.

bruce sanders

“When raising prices on items that many customers will see as necessities, use signage to describe less expensive alternatives.” -Bruce Sanders (Photo: Bruce Sanders)

“When raising prices on items that many customers will see as necessities, use signage to describe less expensive alternatives. Prepare your sales staff to point out the alternatives if a customer complains about a price,” he said.

They might still be upset that the price of the product from their favorite brand has gone up. But if shoppers feel like you still have items that fit their preferences and their budgets, they’re more likely to keep coming to your store.

Coach your staff

When you charge more, you put your staff on the front lines of customers’ reactions. They’ll need guidance on managing aggravated shoppers, said Sanders.

“Retailers hesitate to give scripts; they generally depend on salespeople to come up with the words to say. But it’s a good idea to start them off with specific ways to respond to customers that they can then adapt to their own style.”

Coach your staff on how to reply when customers ask why prices have increased. They should provide an honest, but diplomatic answer, such as “Our suppliers increased their costs,” and then point out products that haven’t gone up as much, said Sanders.

Add value

When shoppers discover that a product they really want costs more, they’ll try to rationalize the purchase anyway. A bit of added value can give them the justification they need.

“It might be expedited delivery, at-home installation, initial training in product use or access to an increased number of alternatives to select from,” said Sanders.

Feature your value as a curator, he suggested. Customers appreciate (and are willing to pay more for) special attention and assistance finding exactly what they’re looking for.

“Spending time asking the shopper what their preferences are will showcase your value as a curator. When I shop at a florist for a bouquet, for example, I expect to pay more than if I bought the same flowers at a plant nursery and paraphernalia at a crafts shop and then put the bouquet together myself. I’m paying for the expertise of the shopkeeper in knowing what fits well and how best to arrange it.”

Create bundles


When raising prices, try bundling similar products so that customers feel that the product value is increasing as well. (Photo: July Prokopiv/Shutterstock)

If you need to increase the price of a single item, consider putting it in a package deal with a couple of other products. Known as “bundling,” this strategy can change the price reference point for shoppers, said Sanders.

“The product you’re charging more for is no longer an identical item when it’s in a bundle. But for the bundling to work, the items must be seen by the shopper as synergistic. Talk about how the items bring out the best in each other.”

You’d want to avoid bundling together unlikely products, such as curtains with a deck of cards. Customers get no extra value from that pairing. But if you bundle a mattress cover with some pillowcases, for example, shoppers will appreciate getting everything at once, said Sanders.

Partner with a charity

Customers are rarely happy about paying more for an item they need. But their outrage will be amplified if you need to charge more during a difficult time, such as a natural disaster. Find a way to give back to the community to help offset their grief, said Sanders.

“Team up with a charity,” he suggested. “This works best when the charity partner is logically related to the price increase. Suppose power outages cause a demand spike for flashlight batteries. Raise the price of batteries noticeably and announce how a portion of the profits will be contributed to Red Cross disaster relief programs.”

Don’t raise prices again too soon

When you determine it’s time to charge more, raise the prices high enough so that you won’t have to do so again in the near future.

“People will be irritated by price increases, so you want those to come as infrequently as possible,” said Sanders. “I recommend that retailers avoid increasing their prices more frequently than once every four months.”

“I recommend that retailers avoid increasing their prices more frequently than once every four months.” -Bruce Sanders

You can always offer sales and promotions if you realize that you can afford to charge a little less down the road, he added.

A price hike doesn’t have to drive your shoppers away. If you offer genuine explanations, alternative options and additional benefits, your customers will be more understanding and continue doing business with you.

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