How to communicate a price increase

Petrol, food, rent, loan payments – the price of just about everything is going up. Though not house or share prices. Sigh.

Supermarket aisles are a spectacle of squinty-eyed shoppers staring daggers at price labels and sucking air through gritted teeth. Let’s skip tomatoes (162% price rise since 2009) shall we?

B2B companies are better placed than retailers to communicate price rises more delicately. That’s because the business of selling to other businesses is defined by human relationships rather than the simple act of filling a shopping trolley with tins and packets snatched from shelves.

Even so, flagging a price increase is a fraught process.

Businesses know better than to put ‘lipstick’ on their story, so most lapse into deadpan delivery of the message: we’re facing increased costs, so we’ve had to increase our prices – sorry about that. Yours faithfully.

There’s plenty of advice online explaining how to communicate a price rise, but most of it states the bleeding obvious. For example: Let customers know well in advance (ya think?). Communicate transparently (whatever that means). Explain why higher prices mean better quality (Really, when the rationale for the price increase is based on rising costs of production and supply?).

One approach worth considering applies the principle of contrast, which states that perception is relative, and if we experience two related things in succession, our perception of the second is influenced by the first.

The contrast effect was made famous by a letter written purportedly by a college student to soften her parents’ disappointment in her terrible grades for American History, and Chemistry.

When sharing news of your price increase, try contrasting your planned price rise with the even larger hit you’ve had to endure.

Maybe your prices have remained unchanged for five years. In the meantime, costs such as office rent and wages have increased by, say, 25%. But you’re sticking to a much smaller 5% price increase, which looks like a big concession.

Contrast provides perspective. Hopefully the client feels your pain as much as theirs and in some way is more accepting – appreciative, even – of your modest price hike.

This approach also taps into the rule of reciprocation – that we should try to repay favours.

People hate being in a state of obligation. This rule also extends to the obligation to make a concession to someone who has made a concession to you. Your concession, evident in a price increase that is dwarfed by the oversized cost increases you’ve endured, is hard to ignore.

It also helps if you’re liked. Plenty of research supports the idea that messages are more likely to be successful when recipients are first made to feel positively toward the messenger.

Hopefully your services are valued and your people are liked. Perhaps keep your accountant out of the picture (I mean, who likes accountants? Joking, kind of).

Let client managers break the news. Over lunch, perhaps, on your dime (the rule of reciprocation).

Here’s what I’d say to my clients in the event of a planned price increase (which I’m not planning to do, but never say never). And note, this message would likely be delivered over lunch and preferably after a month of spectacular over delivery.

But for the purposes of this exercise, here’s my pitch.

Dear Bob

Our costs have skyrocketed, which I’m sorry to say means that we will be raising our prices from next month.

This is our first price increase in over five years, during which time our costs have risen by 25%.

It’s a tough time for everyone, ourselves included.

However, the good news – if I may put it that way – is that we are raising our prices by just 5%.

I hope you understand our position and that our successful working relationship continues.

But if you feel more discission on this matter is warranted, let’s talk at our next meeting.

In the meantime, I hope you’ll accept my offer of two tickets to <name your event> as a small gesture of our appreciation for your continued support.