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Whether it’s because of changed economic circumstances, rising input costs, or just good, old-fashioned inflation, most companies are eventually forced to have the awkward conversation with their customers that begins, “We’re raising our prices.”

In recent months, the sinking dollar has forced many Canadian businesses to ask their clients to pay more. To help you sell your rate hike to your customers without driving them away, we asked some experts for advice on the best way to raise prices. Here’s what they had to say.

You have to tell a story…

“You don’t change prices without a story. That is arguably the dumbest thing you can ever do. The challenge is when the story is highly complex. Mobile communications is a perfect example. Everybody screams that three-year contracts are too long, but because it’s a three-year contract, the cost of the phone can be spread out. You have to plan a campaign around these notions. Instead of an increase coming out of the blue, it seems like a natural consequence of a series of events that have led to the company to say, ‘There’s nothing more we can do.’”
—Kenneth Wong, associate professor of marketing, Smith School of Business, Kingston, Ont.

…except when you don’t

“There are no hard and fast rules around this, and part of being a good marketer is understanding when the rules apply and when they don’t. This rule that you should always provide an explanation—well, that could be a bad business strategy. Say I’m running Esso right now, and I need to raise my price by 5¢ because the cost of crude oil went up. If I spend a million dollars explaining that to the public, I’ve just wasted a million dollars of my shareholders’ money. People are conditioned to expect some price increases, just like we’re conditioned to expect gas prices to go up or down with the price of crude oil. Spending money to tell people something they already know is a bad business decision.”
—David Soberman, professor of marketing, Rotman School of Management, Toronto

Big clients need special treatment

“If it’s a large customer, you need to tell them face to face and be prepared for a long fight. Have your salesperson go in there to make the announcement. If the discussion escalates to another level and the client pulls in a leader to the conversation, you need to be prepared to escalate on your side as well. Don’t leave the salesperson hanging there. Bring in someone on a similar level, such as your VP or general manager, to support that salesperson. These kinds of discussions can go on for months. One of my clients spent a year negotiating with one of the largest companies in the world. But they were persistent and resolved to get that price increase, and eventually my client wore them down.”
—Ralph Zuponcic, president, Price Point Partners, Hudson, Ohio

Don’t be so apologetic

“Clients I coach fall down by simply going in and feeling guilty and apologetic about the price increase. Then they feel like they’re backpedaling when they’re having the conversation. If you’re business-to-business, every one of your clients has built their company by running a smart commercial entity, and they don’t give away products for free. If you have a fact-based conversation to explain the rationale for a price increase, they will get it. You want to absolutely ignore the impulse to throw things in and soften the blow. Even if there is a price increase, I want to be absolutely sure my clients are getting far more value than they’re paying for with my solution. This can be an opportunity to review the value you’re providing.”
—Mark Cox, managing partner, In the Funnel, Toronto

Acknowledge the outrage

“If I’m a consumer and I say, ‘I’m morally offended that you did this,’ and you respond by listing a product’s features and benefits, I’m going to be like, ‘You’re not hearing me.’ You have to respond to moral outrage with emotion. You can say you have not done a good job of communicating what you’ve been investing in. Then you can go on to how you’re improving customer service or whatever it is. But first, you admit, ‘Our bad.’”
—Kelly Peters, CEO and co-founder, BEworks, Toronto

This article is from the April 2016 issue of Canadian Business. Subscribe now!

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Have you recently had to raise your prices? How did you communicate the decision to customers, and what did you do to make them stay? Share your experiences and strategies by commenting below.

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