How to Communicate Price Increases Caused by Inflation
- Apr 18, 2022
- Travis Epp
As manufacturers continue to face supply chain challenges, rising commodity costs, and market inflation, the last thing business owners want to discuss with their clients is price increases. And while sometimes these price hikes are unavoidable, it can leave business owners between a rock and hard place – trying to keep customers happy while communicating that services are going to get more expensive.
Here are four things to consider when communicating price increases to maintain strong relationships with customers.
1. Identify Your Key Message or Justification
If you’re not already regularly increasing your prices every year, you’re going to owe your clients an explanation for the change. Everyone is being affected by today’s various market pressures, so a clear message that demonstrates transparency is key for your clients to gain an understanding.
One strong message to communicate with your customers is what they stand to gain from a price increase. For example, in manufacturing quality is a major driver when choosing one vendor over another. State that with the rising costs of a certain commodity, the price increase is necessary to deliver the same level of quality and service your customers have come to expect.
2. Communicate Changes Directly and in Advance
When it's time to have that tough conversation with a client, how and when you communicate that change is more important than ever.
For some clients, a letter or email explaining the change, its details, and reasoning may suffice. For higher-volume clients, a face-to-face meeting or video call from a senior business development employee or executive to present the upcoming changes may be more appropriate, depending on the relationship.
No one wants to be caught off guard, so give your clients plenty of time to learn about the changes and budget for them. This also opens an opportunity window for them to purchase more product or materials before the price increase is realized.
3. Brief Your Team
Make sure your sales and customer service employees are made aware of the changes and are prepared for some negative feedback from clients. Both teams should be working in alignment with exactly how they are communicating any changes with all customers.
Often, when customers are hit with the news of a price increase, they’ll be left frustrated. If this is the case, it will be on your team to listen to and address their concerns. This second round of communication is just as important as breaking the news and, in many cases, simply listening to your customers and giving them a platform to express their concerns can help solve the issue.
4. Offer Flexibility
Businesses across the country are already under constant stress even before being introduced to price hikes from multiple vendors. There are no absolutes in business and there shouldn't be when communicating price increases either, so offer your customers options flexible to their unique situations.
For instance, if it comes down to keeping or losing a client, find a compromise by offering an opportunity to sign an 18-month contract, rather than 12 at the current price. People like having options and forcing a price increase with zero wiggle room or flexibility can leave clients feeling cornered and looking elsewhere.
Prices are rising across the board in today’s inflationary market. In many cases, particularly in manufacturing, it would be more surprising to not be increasing how much you’re charging for your product or services. When it comes time to break the news of this change, consider not only the strategy that goes into determining the new cost, but how you’re communicating that to your customers.
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Travis Epp is EisnerAmper’s Partner-in-Charge of the Manufacturing and Distribution Group, with nearly 30 years of experience in public practice and private industry. Travis focuses on private companies in the middle market.
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