With inflation still high, price increases may be inevitable. How to contact hiking

Businesses are yet feeling the pain of inflation. Cue the constant supply chain struggles, and precious few entrepreneurs have managed to avoid a price hike — sometimes more than once.

It’s a decision retailers don’t take lightly: There’s a fine line between staying competitive and financially viable and alienating customers. Price increases are often necessary—especially as inflation remains elevated—and customers may be willing to accept them, as long as they are carefully timed. Here, five entrepreneurs share the communication strategies that have worked for them.

Be honest

Empathy goes a long way when it comes to handling price increases, said Mark Cohen, director of retail studies at Columbia Business School. Inc. last fall. “Without customers there is no future [for your business]”, says. “Showing that you’re there for them goes a long way in ensuring that your existing customer stays there.” This means being polite, as well as being honest and transparent about the need for price increases.

This can look like a simple confirmation of upcoming price increases or a more in-depth explanation. Stephen Tracy, co-founder of Kingston, New York-based candle company Keap, took the latter route, explaining the impetus behind the brand’s March 2022 price increase in an email newsletter as well as several blog posts . “The only way we can be a sustainable business is to focus on building long-term relationships with customers,” she says. “We really spent a lot of time thinking about what it means to show up with understanding and compassion.” Tracy says the company has received some customer responses showing their own support for the business and no complaints about the price change.

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It can be beneficial for businesses to use price change communications as an opportunity to remind customers of their value. New York-based underwear brand CUUP raised prices on select items in August due to increased material costs—and skimping on materials to maintain existing prices wasn’t an option, says Pascale Gueracague, head of design. “R&D and textile innovation is the underpinning of what we do and we really articulate that to our customers,” he says. In its announcement of the price increase, CUUP explained that the move was necessary to “continue to source the same high-quality materials from some of the most innovative materials factories in the world.”

No surprises

Announcing price increases doesn’t do anything for customers if they go into effect immediately. Instead, several business owners recommend announcing price changes in advance, with a week to a month’s notice. Not only does this give customers a chance to plan potential purchases–it can also temporarily boost sales as they stock up as low as they can. That strategy helped Austin-based cleaning products company Branch Basics secure additional cash to invest in inventory when it announced its price increases via email in April. “We were able to secure a lot of new customers at that time — people who were in the consideration phase,” said CEO Tim Murphy Inc. on July. “I thought existing customers might back off [after the price increase]but that didn’t seem to happen at all.’

Be respectful

When Melbourne-based luggage brand July, which began selling its products in the US in 2021, had to raise its prices in May 2022, co-founder and chief strategist Athan Didaskalou knew he had to make an announcement to customers . However, he did not want it to appear that the business was trying to overtly take advantage of an opportunity to increase sales. For this reason, July announced the price increase on its email-only listserv, which Didaskalou says is characterized by high engagement, with a simple email without graphics. “We know it’s a difficult time for a lot of people, and especially since we’re selling luggage — non-essential goods — we wanted to be respectful,” he says. After the announcement, July saw a spike in sales, especially from big-ticket customers that were set to increase.

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CUUP announced its price increases via email and an Instagram post — a move Gueracague says was intended to reach both existing and new customers. “We wanted to build on the sense of transparency that has always been at the core of our brand,” he says. “We had this idea: ‘Let’s give people an opportunity if they want to refresh their underwear drawer at a lower price.’ It’s especially important to give new customers “breathing room” to use CUUP’s sizing tools, such as its free virtual components, Gueracague says.

Give options

For subscription-based businesses, price increases can be a particularly sensitive issue. Price change announcements are vital to ensure customers don’t see surprise bills, but to prevent subscription cancellations, businesses can find ways to compromise.

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Rowena Scherer, founder and president of New York-based multicultural cooking kit company eat2explore, says she has approved a 12.9 percent price increase for her brand’s explore boxes, effective July 1, 2022. But instead of raising the prices overall, select more subtle changes: The price of an explorer box changed from $24.95 plus $6 shipping (for a total of $30.95) to $34.95 with free shipping. Although prices increased, in the two months after the switch, Scherer says conversion rates actually increased by 58 percent. “For existing customers, the price increase didn’t change much, but for new customers, it made a big difference,” he says. When the business previously had a shipping fee, he adds, customers tended to abandon their carts at much higher prices, even though the base price of a box was cheaper—it’s all in the customer’s mindset.

Keap, which makes most of its sales through its subscription offerings, also added an incentive for subscribers to stick around: If they changed their subscription from one candle a month to two candles every other month, they could keep the same price per candle. Because the shipping cost for two candles is not much higher than the cost for a single candle, selling two (or more) at a time would allow Keap to maintain profit margins while allowing customers to pay the same amount – although in larger amounts, at less frequent intervals. “We were excited to be able to offer something that allowed us to match our old pricing, even if it meant slightly adjusting the way you buy from us,” says Tracy. While many customers adjusted their subscriptions to the every-other-month model, Tracy says many were willing to pay a bit more to keep their subscription for one candle a month. “We’ve learned that it’s best to try to give people the things that are meaningful to them.”

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