In my experience, business owners are often hesitant to increase prices. One of the most common reasons is a fear that a price increase will cause their customer to seek out another supplier.
Price Is Seldom The Only Factor
Very seldom is your customer buying from you because of price alone. Support, service, and quality can be equally important. Often the relationship a company has with its customers will be the decisive factor. Building relationships with key customers will help business owners understand their customer’s business and gauge the potential impact of a price increase.
Know Your Numbers
Another reason for hesitation regarding price increases is not having a good handle on their numbers. It is surprising how many leaders of SMEs don’t have a clear financial picture of how their business is performing on a day-to-day basis. For any business, getting timely and accurate financial information needs to be an absolute priority.
Communicating Price Increases
It’s always valuable to communicate price increases, even small ones. Putting through an increase without communication can be construed as arrogance and can be damaging to the relationship. Communicating the rationale for a price increase will go a long way toward maintaining the connection with the customer. I believe that many businesses are leaving money on the table. They worry about negatively affecting their relationship with the customer and wait until margins have eroded before they act.