How to talk about Price Increases with Customers
Trade businesses, like many others, are battling the financial landscape the world currently finds itself in. With increased costs to materials, labour, equipment and more, you may be considering increasing your prices.
As the cost of living is ripping through our economy, meaning that everyday essentials are continually at the behest of inflation, you may wonder how to inform customers and partners of price increases.
Businesses must review prices regularly; in the UK, most prices increase yearly in line with the Retail Price Index and general inflation. However, with the current unpredictability, protecting your business by pricing your products and services correctly will ensure you continue on the right path.
Whether you are a sole trader or business owner, we have hints and tips on how best to communicate price increases without rocking the boat.
Five ways to inform customers about price increases
Explain to them why you're increasing costs - whether it's business expenses or price increases to important materials like fuel or energy, give your clients an explanation for why your costs are rising.
Draw attention to the quality - ensure that your price showcases the quality of the equipment and materials you use.
Be understanding - showing empathy and comprehending how your clients may feel after news of a price increase will help them realise that you haven't taken this decision lightly.
Be clear and concise - communicate what is changing with prices, and don't apologise, as it's a business-critical decision based on market circumstances.
Call it what it is - Saying it is a 'price increase' clearly shows the clients what it is and that you are not beating around the bush. Customers aren't daft and can feel when something doesn't sound right or if they are being tricked. Remember, tradesmen and women build trust through authenticity and honesty, so stick to these traits and inform your clients the right way.
Common worries about increasing prices
Trades businesses, like any other industry, will have worries about cost increases. Of course, we'd all love to be able to offer customers the same price throughout our careers, but sadly, that's not the way the world works. Price increases are now the norm, and we have found familiar questions businesses ask themselves when exploring price increases:
What if I lose customers?
Having a strong customer base is great; however, some tradespeople will naturally worry that price increases may rock the apple cart resulting in clients looking elsewhere. As pricing is a complex subject to approach, following the methods above will undoubtedly help communicate to your repeat customers the cost impacts on your business.
As we have mentioned in various articles, demand for tradespeople is through the roof and with a shortage of skilled workers, the jobs needed to be done show no signs of slowing down. Add to the mix that supply chain issues and material shortages are creating major backlogs and price surges; many tradespeople have been feeling the squeeze for the past 18-24 months. With these issues, reviewing your pricing is best; otherwise, your business will start to dip into the red.
We wrote some helpful articles on pricing your work correctly and how the supply chain impacts trade businesses. Loyal customers who trust you will understand price increases are expected in the current climate, and those who are sceptical may need the reassurance of your work quality and reputation.
When should I increase prices?
As a business, you need to strike at the right time regarding price increases. You will first need to figure out when and how much you increase your customers' prices and then form a plan of how you do so. This can include gradual price increases over time or one yearly jump in costs.
Price increases in the trades aren't handled the same as in other businesses. Usually, a typical company will experience cost increases throughout the year and factor this into a yearly percentage increase to customers. As trade businesses price on a per-job/project basis, you have the ability to factor in fluctuating prices quicker than most others.
Times are tough, and customers are feeling the pinch just as much as businesses, so offering to help customers along the way with gradual increases is a great way to handle their concerns. That said, as a tradesman or woman, you shouldn't be afraid to increase your prices in line with inflation and your business expenses. If customers in your area are happy with your service and want a good job, they are likely to pay the small price increases to ensure the job is done right.
How do I make price increases clear?
When a customer approaches you for a quote, it's best to price up the job and be clear that this is the best price right now, but depending on how long they take to decide, the price could be subject to change due to the volatility in material prices.
As a trade business, you should factor future price increases into your quote to save for price fluctuations when you do the job. Let's imagine you are a carpenter and quote for a new fence at a customer's property that will be done in 4 weeks, price the job with a small percentage on top that adjusts for any price increases to lumber.
It's vital that you communicate with customers in a transparent way. Imagine if Netflix imposed price increases without you knowing! It helps your customers know where they stand and lets them plan their finances.
Why choose Rhino Trade Insurance?
In these uncertain times, you can help your business be clear and concise when it comes to price increases for your customers. Trade businesses must regularly check the market and analyse costs; otherwise, they will quickly become unprofitable.
Alongside this, you must ensure that you have sufficient trade insurance to protect yourself financially against any shocks from accidents or damage. Risking your business's livelihood by not having the right level of insurance could cause you to go out of business because of a significant compensation claim.