2011 was certainly a water shed year for customers taking to social media and other channels to vent their frustration over price hikes. Backlash from angry customers forced Verizon, Bank of America and Netflix to reverse their planned price hikes. We wrote about price hike push back from customers in our post “The Most Annoying Fees of 2011.”
However, with business picking up in many sectors, Rafi Muhammed writes in his article for the Harvard Business Review, “Don’t Let Customers Freak Out Over Price Hikes”, “chances are that your company will consider a price increase this year.” Rafi is a pricing strategy consultant and author of The 1% Windfall: How Successful Companies Use Price to Profit and Grow.
According to Rafi, a CFO advised him, “The key is not to let a price hike become emotional to customers, because that’s when they become irrational and ultimately leave.” In order to avoid the backlash that Verizon, Bank of America and Netflix faced from their customers, Rafi recommends businesses follow the five tips below.
- Employ Bedside Manners. Make sure to explain to your customers why you are raising prices.
- Offer Choices. According to Rafi, customers don’t like to be “cornered” and are more agreeable if there is an “option to save money.”
- Keep Your Word. Again, customers will be more agreeable if you leave their existing deal intact and only raise prices “to new purchases and renewals.”
- Emphasize Value. If you are offering a good deal even with the price increase, demonstrate to your customers how it is a good deal.
- Everyone Else is Doing It. Let your customers know that competitors are also raising prices but again, show how your prices are a better deal.
Hopefully, by following these tips, when it comes time to increase your prices you will not be met with angry customers.