These days, almost everyone’s doing it. What’s worked for you? Do you warn customers/clients in advance? Or do you just do it? Do you need to explain? Or does everyone understand at this point? Are you just trying to keep up with your own expenses? Or is this an opportunity to improve your margins? What have you learned?
We typically give our customers a 30-day advance notice of a price increase...
W we also allow them to purchase additional products, up to 12 months in the future (blanket orders) on a non-cancelable / non-returnable (NCNR) basis that enables them to lock in the pricing for the future. Our strategy here is to prevent our customers from shopping future orders, while building a strong backlog and giving us the opportunity to make larger bulk purchases of raw materials and filling full containers of material (which saves us money on our costs). Yes...there is some financing costs, but the cost of money is so cheap at the moment, it really makes sense for us to lock up the customers long-term.
My brother runs a solo landscape maintenance business. He had just under 50 customers. He was looking to raise his rates. What we did was identify the customers who didn't pay current rates, ones that weren't close to other jobs, and ones he hated doing. He raised those as part of a year end update. Some paid the increase. Some dropped him. He then picked up better paying customers and project work that also paid better. He was also able to free up a day every other week for fun stuff like going hunting or fishing. So he got paid more, had more fun, and enjoyed his work.
In my experience, almost all businesses are under-priced for where they could be. Unless you're hearing no at least ten percent and hopefully twenty percent of the time, your prices are too low. For most of the customers we work with we've been steadily raising prices for the past two years and have had little to no negative effects. I've been using this strategy with our consulting business for years and it's worked well.
We raised prices on September 1st. Two weeks before the price change, we sent an email to a curated list of customers who had either open estimates or invoices, alerting them to the impending change. The email served as both a courtesy and a call to action, and helped us convert some customers who were still “kicking the tires”.
We increase prices every year at the same time having trained our wholesale customers to expect it. This fall we did something new because our forecasts indicated that we would sell completely out by Christmas. We increased prices on our most popular items 20% and three months earlier than usual, effective immediately. Our retail clients hardly noticed, which is typical, and the wholesale customers understood and were mostly glad for us. We purposely chose to take advantage of the demand by raising prices rather than attempt to ramp up production quickly. It is in line with our general strategy to focus more on profit than on sales. It hasn't stemmed demand much, but I'm happier running out of stock at these prices.
We played with pricing for years. There's a great book on pricing that I love, called, "Confessions of the Pricing Man." We recently tried reducing all our prices, we love to be contrarians, and it's given us a real leg up on Amazon rankings for our headsets. Price increases are good, but sometimes being different is even better. I'm not saying we've got this right, we're just testing. :)