The Importance of Price Increase Communication

One of many tasks in business that is never pleasant, but a must-do, is communicating a price increase to customers. Positioned well, the price increase can become one key source that allows you to mitigate cost increases and capture on the value delivered — protecting from margin losses.

The question at hand is: how can companies ensure a high stick-rate for their planned market price increase, while not compromising too heavily on client retention?

To avoid or limit customer complaints, the risk of losing customers, or the need to retract the price increase, one must perform well in communicating the increase towards the customer. Here are some actions you might want to consider when communicating a price increase.

Communicate the price increase with clarity

Communicating the price increase is no easy task, therefore many companies avoid telling customers in advance, while in certain industries one common practice is to reduce the contents of the packages offered at an unchanged price.

Without clear communication, this “stealth price increase” approach can damage the customer relationship and might sow mistrust for the price positioning of the overall product portfolio. Therefore, communication towards customers is a must to ensure their acceptance.

As B2B companies and purchasing departments by default prepare for a price increase year over year, and finance departments start their budgeting with a certain lead-time, it is also key to set up the communication some time in advance — allowing the market to react and triggering constructive discussions, including contractual business agreements which require a minimum advance notice.

Honesty matters when it comes to client relationships. When you plan to increase your prices, communicate accordingly, call it a price increase, be transparent about it and plan ahead. It will be valued.

Explain the price increase — make the reasons transparent

Going to market with an unintentional communication, where the clients are informed about the increase by way of a “fuzzy” why and no concrete details, might alienate customers.

Communicating the why is as important as the increase percentage itself. Clients need to understand there is an explanation they can relate to. Inflation was the key topic until 2022. Since 2023 we see markets cooling down and material and energy costs dropping, while increases in labor, interest rates, logistics and other costs like IT and services persist. There is still a core PPI inflation while customers ask for price cuts.

Crafting a message that explains the increase intentionally, related to your value proposition, will be of essence.

Connect the increase to a customer-centric value story

To increase the success or effectiveness of your price increase, create a communication that is customer-focused. This type of communication provides a value narrative, focusing on why the increase is happening and how it relates to the customer value.

There is a script to it, and whether companies go through all of the steps or not, the outcome is the same: link the price increase to the company’s value. It starts with customer feedback, connecting it to identifying the customer’s needs. Once those are clear, it follows an investment done by the company — improving a product, developing a new one, expanding services, or offering greater flexibility — which results in new features that benefit the customer and that they highly value.

A compelling story can be effective in the eyes of the customers despite current market conditions. Customers will be inclined to pay for a price increase, rather than paying the same price and having a decrease in the current level of benefits — for example through decontenting. It reinforces the brand’s value to the customer.

Usually, there is some effort that needs to be put into the communication and storytelling towards customers. More often than not, one size does not fit all; rather, having a segmented approach and creating a diversified communication is key in making sure such an initiative will be rewarded as expected — while customers feel they are being treated fairly and valued as your partners.

Are you ready for the next price increase?

Have you finalized the price increase strategy for the new fiscal year, or are you currently struggling to develop a clear price increase communication with a customer-centric value story?

Are your sales teams trained to lead price increase negotiations with procurement?

We are ready to step in and support you on this journey. Simply reach out to us or participate in one of our pricing negotiation trainings.

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Originally published on LinkedIn in November 2021. PricingWorks helps B2B companies design and execute price increases that stick. Book a scoping call to discuss your next price increase.