Most businesses know they need to increase prices. Few know how to increase prices without damaging relationships or losing customers. B2B firms fear contract pushback. Retailers worry about foot traffic. Online businesses panic over instant price comparisons. Commodity players feel trapped by market rates. So they delay. They discount. They absorb rising costs. And margins quietly erode.
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We see this hesitation everywhere. The problem is not the increase itself. It is the lack of structure behind it. In this series of articles, we guide you through how to increase prices with clarity, confidence, and control, thereby protecting your profit, strengthening your positioning, and leading the conversation instead of reacting to it.
Table of Contents:
I. How to Increase Prices and Justify It Before It Turns Into a Churn Problem 📱
II. Strategies on How to Justify Price Increases and Build Customer Trust 🧯
III. How to Make a Letter Communicating Price Increases to Customers 🐖
IV. How To Increase Prices of Food Without Losing Customers Using Value-Based Strategies 🥨
V. How to Transparently Tell Customers About Price Increases 💰
VI. How SaaS Vendors Can Justify Price Increases and Keep Clients Happy 🤝
VII. How to Increase Your Prices Without Losing Customers in a Small Business 🐌
VIII. Price Increase: The Strange Pricing History Of Coca-Cola 🥤
Capability Building Programmes For Pricing & Sales Teams!
How to Increase Prices and Justify It Before It Turns Into a Churn Problem 📱
Verizon makes a rare and honest admission. The company says its pricing strategy has driven customers away. New CEO Dan Schulman openly links rising churn to repeated price increases that did not deliver matching value. Over three years, churn rises by 0.25 percentage points. That may seem small, but it equals roughly 2.25 million fewer net customers. This is a stark reminder of decions about si and what happens when they are not clearly tied to value.
If we strip back the numbers, the message is simple. Customers tolerate price rises only when they see real value. When they do not, they walk. Verizon’s case is not unique. Across the customer churn in telecom industry, and in many other service and subscription markets, a weak price increase strategy quickly turns into costly pricing mistakes. Research shows that when pricing aligns with customer-perceived value, churn can fall significantly. Paying attention to this is not optional. It’s vital.
Verizon’s Mistakes on How to Increase Prices and Justifying Them
It is unusual for a big company to blame its own pricing strategy. Usually, leaders defend their pricing decisions. But Verizon’s admission highlights a broader issue about how to justify price increase decisions. Pricing is not just a lever for short-term revenue. It is a strategic capability that shapes loyalty, retention and long-term growth.
In Verizon’s case, the company implemented several price increases across plans and fees, without clearly explaining or linking them to added value. Customers reacted predictably. They left. The result was a sharp rise in customer churn. This reminds businesses that every price increase strategy must be anchored to value. Otherwise, it becomes one of the most costly pricing mistakes a business can make.
Capability Building Programmes For Pricing & Sales Teams!
Increased Verizon Prices and Customer Churn: What It Reveals About How to Increase Prices in the Telecom Industry
Verizon’s churn increase of 0.25 percentage points may look modest at first glance. Yet every small rise in churn matters. For large subscription businesses, even a 0.01 point increase can mean tens of thousands of lost customers. Verizon’s own figures show this. It translates into about 2.25 million fewer net additions over three years, highlighting the real cost of failing how to justify price increase decisions.
This matters, not just for revenue, but for brand strength and future growth. Lost customers reduce market share. They also weaken a company’s competitive position. In highly competitive sectors like telecoms, rivals like AT&T and T-Mobile have been growing while Verizon loses ground. Customers are comparing more than price. They are comparing perceived value, quality of service, and overall experience. When pricing ignores this, churn accelerates.
How Many Pricing Analysts Do you Really Need? 👩💼 Podcast Ep. 40!
Why Customers Punish “Empty” Price Increases
Customers do not revolt against price increases per se. They react when increases feel unjustified. This is the core challenge of how to justify price increase decisions. Customers judge price through the lens of perceived value. If they do not see a corresponding gain, they feel short-changed. Then they switch. Pricing research shows that aligning price with value reduces churn and improves loyalty, helping avoid common pricing mistakes.
When customers feel they get fair value, they stick. If not, they look elsewhere. That simple dynamic holds across industries. And it is crucial for pricing teams to understand. Pricing is not a cost allocation exercise. It is a value communication exercise.
Verizon Learns Its Lesson from Pricing Strategy Mistakes
In response, Schulman signals a reset. He rules out “empty price increases” as a growth strategy and reframes how to justify price increase decisions around clear customer value. Price rises are still possible, but only when they are earned. Verizon expects flat wireless revenue this year as it laps past changes in Verizon prices. That may look weak in the short term. But the company now targets up to one million new postpaid customers. This is a deliberate price increase strategy. Prioritise retention and share first. Then grow.
This shift matters. It shows a clear choice to put customer value ahead of quarterly revenue boosts. That is the essence of sustainable pricing and how businesses avoid repeat pricing mistakes.
How to Increase Prices and Justify Them the Right Way
Execution now becomes the real test. Pricing trust does not return quickly once broken, especially when how to justify price increase decisions are unclear. Customers remember unjustified rises. Rebuilding confidence requires consistency, restraint, and proof of value in every price move. Teams must track how pricing affects behaviour, particularly where customer churn in the telecom industry remains high. This calls for stronger pricing governance, clearer value articulation, and tighter cross-functional alignment.
In many organisations, pricing decisions are fragmented. Marketing sets discounts. Sales negotiates custom offers. Finance approves cost-plus mark-ups. This fractured approach leads to pricing mistakes and weakens any coherent price increase strategy. Verizon’s experience shows why a unified, value-based pricing capability is essential.
What Pricing Teams Should Do Differently in How to Increase Prices
For pricing teams, the task is urgent and practical. Start by getting clear on what customers genuinely value and how to justify price increase decisions with evidence. Use data, customer interviews, and willingness-to-pay analysis to define value drivers. Then, tie prices directly to those drivers. This avoids costly pricing mistakes and works. Firms that align prices to perceived value improve loyalty and growth.
Keep reviewing pricing decisions as value shifts. Markets evolve. Competitor offers change. Customer needs change. A strong price increase strategy adapts with them. Build dashboards that track churn, perceived value, and customer feedback. Make pricing a continuous conversation, not a once-a-year event.
Pricing Recruitment For Pricing Managers!
What Business Leaders Must Learn From Verizon
For business leaders, the lesson is blunt. Price increases without value destroy demand faster than they grow revenue. This is the risk of failing how to justify price increase decisions. Poor pricing weakens loyalty and damages the brand. Leaders must back pricing teams with the right resources and a value-centric mindset. That includes investing in research, analytics, and cross-disciplinary collaboration to avoid repeat pricing mistakes.
Some leaders still see pricing as a financial lever only. That is a mistake. Pricing is strategic. It shapes customer relationships, market positioning, and long-term growth, especially when a price increase strategy is used to drive sustainable value rather than short-term revenue.
〉〉〉 Get Your FREE Pricing Audit 〉〉〉
How to Build a More Sustainable Price Increases Strategy
Poor pricing does more than erode revenue. It drives away customers, weakens trust, and limits future growth. Verizon’s rare admission is a clear wake-up call on how to justify price increase decisions. Executives must rethink how pricing choices are made and rewarded. Make pricing a boardroom priority, not just a spreadsheet exercise. Pricing teams, in turn, should lead value-based conversations across the business to avoid costly pricing mistakes. Every price move must link to clear customer value and adapt as that value changes.
Price with purpose. Price with value. That is how sustainable growth is built. Let’s talk about what your customers truly value and how your organisation supports pricing today. Reach out for a practical, honest discussion about your pricing and organisational challenges. Together, we can turn pricing from a risk into a strength.
Capability Building Programmes For Pricing & Sales Teams!
Strategies on How to Justify Price Increases and Build Customer Trust 🧯
Price justification scrutiny is a common part of doing business. All companies face it at some point. In Australia, this scrutiny is intense. Some executives, like Darren O’Brien of Mondelēz, even accuse the business culture of profit shaming. They argue that public criticism of price increases is unfair. However, understanding and addressing these concerns is crucial for maintaining customer trust and business success.
Many businesses see pricing scrutiny as harsh criticism. However, they fail to recognise it as an opportunity. It helps understand customer needs and refine pricing strategies. Accusing profit shaming without seeking improvement can be harmful. It damages the company’s reputation and weakens customer relationships. Embracing feedback can lead to better strategies and stronger customer trust. This approach ensures long-term success.
In this article, we are going to discuss effective strategies for handling price justification scrutiny. First, we present the importance of transparency and clear communication. Then, we delve into the benefits of innovative pricing strategies and internal organisational improvements. We argue that businesses can turn pricing scrutiny into an opportunity for improvement rather than seeing it as profit shaming.
At Taylor Wells, we believe that a strategic approach to pricing, combined with a focus on customer value, enhances trust and competitiveness. By the end, you will know how to navigate pricing challenges effectively and maintain strong customer relationships.
Capability Building Programmes For Pricing & Sales Teams!
How Major Companies’ Price Rises Are Exposing the Real Challenge of How to Increase Prices Under Scrutiny
Businesses, particularly in the food and manufacturing sectors, have recently faced intense scrutiny for price increases justification. Executives like Darren O’Brien from Mondelēz accuse the business culture of profit shaming, especially when companies see significant revenue growth amid inflation due to price hikes.
This scrutiny often arises from blanket price increases that are not properly justified. When businesses raise prices across the board without clear reasons, it leads to public backlash. Consumers feel the pinch and react negatively, viewing these hikes as unfair.
Darren O’Brien highlights the need to balance rising costs with profitability, arguing that this balance is crucial for driving investments and innovation. However, this view often conflicts with public perception. The public tends to see companies as passing costs onto consumers without sufficient justification, leading to negative reactions and eroding trust.
How much should a CEO know about Pricing? 👨💼 Podcast Ep. 63!
Blanket price increases have several downsides. Firstly, they alienate customers. People are highly sensitive to price changes, especially when they appear unjustified. Such increases erode trust and loyalty, pushing consumers toward competitors. Secondly, these price hikes can damage a company’s reputation. Businesses face accusations of profiteering, resulting in public backlash and negative media coverage.
In essence, while price increases are sometimes necessary, businesses must manage them strategically. They should communicate the reasons for price hikes clearly and explore alternatives to blanket increases. This approach helps maintain customer trust and preserves a competitive advantage.
Why Consumers Accept Some Price Justifications—and What It Teaches Businesses About How to Increase Prices
Consumers accept some price justifications and reject others based on how they perceive value. When businesses raise prices, customers want to understand why. If the reason aligns with their expectations or adds noticeable value, they often accept it. However, if the price increase seems unjustified or unclear, they resist.
For example, if a company introduces new features or improves product quality, the price justification feels reasonable. The customer can see a direct benefit from the higher price. A small business selling premium coffee may increase its prices after sourcing higher-quality beans. If customers notice better taste or freshness, they are more likely to accept the price hike.
On the other hand, if a price increase occurs without clear improvements, customers feel the price justification is weak. Take a small local restaurant that raises prices but doesn’t improve its menu or service. Without visible upgrades, customers might feel they are paying more for the same product, which leads to dissatisfaction.
Effective communication plays a key role. Businesses that explain the reasons for a price increase, such as rising operational costs or improved product features, find more acceptance. Lack of transparency makes customers suspicious, leading them to reject the change.
Another factor is timing. If price increases happen too often, customers may feel exploited. A small business that gradually adjusts its prices, while showing ongoing improvement, has a better chance of acceptance.
How to Build Trust with Customers When You Want to Increase Prices
Price justification scrutiny shouldn’t be seen as profit shaming but as a chance to enhance your offerings and strategies. By addressing customer concerns and refining pricing approaches, you create value for your customers. This focus on continuous improvement and a customer-centric approach builds trust and strengthens your brand. As a result, you can see increased sales, higher revenue, and improved profitability. Embrace this scrutiny as an opportunity to better align with your customers’ needs and differentiate yourself from competitors.
Effectively Communicating How to Increase Prices—and Justifying Them With Confidence
Addressing price justification scrutiny effectively is crucial for maintaining trust and competitiveness in today’s market. Here’s how businesses can navigate this challenge:
1. Transparency in Pricing
First and foremost, businesses need to be transparent about price increases. Clearly communicate the reasons behind these changes. Highlight factors such as rising raw material costs, increased energy prices, and higher freight expenses. For instance, if a company raises prices due to higher costs of cocoa, it should openly explain this to customers. Transparency helps build trust and reduces negative perceptions. When customers understand why prices are rising, they are more likely to accept the changes.
2. Value Justification
Next, it is essential to justify the value of the product or service. This means not just explaining the costs involved but also emphasising the quality and features that customers value. Take Mondelēz as an example. The company cited higher cocoa costs to justify its price hikes. However, it is equally important to stress how the quality and benefits of the product justify the higher price. When customers see the value in what they are paying for, they are more likely to accept and even appreciate the price increase.
3. Innovative Pricing Strategies
Rather than opting for blanket price increases, businesses should consider innovative pricing strategies. Instead of raising prices uniformly across all products or services, tailor price changes based on product lines, customer segments, or geographic markets. For example, a company might increase prices on luxury items more than on essential products. This approach minimises the impact on price-sensitive customers while still maintaining profitability. It also allows businesses to be more strategic in managing how price changes affect different customer groups.
4. Cost Management and Efficiency
Improving internal efficiencies and managing costs effectively is another key strategy. Businesses should focus on optimising their supply chains, investing in technology, and negotiating better terms with suppliers. By reducing operational costs internally, businesses can avoid passing excessive costs onto consumers. For instance, investing in more efficient manufacturing processes can help reduce production costs, which in turn can keep price increases to a minimum.
5. Engage with Stakeholders
Maintaining open communication with all stakeholders—customers, employees, and investors—is crucial. Engage in discussions about the reasons for pricing decisions and the challenges faced. This engagement fosters understanding and support. When stakeholders are informed and involved, they are more likely to support the company’s pricing strategies. For example, if employees understand the reasons behind a price increase, they can better communicate this to customers and support the company’s decisions.
6. Monitor Market Trends
Finally, keeping a close watch on market conditions and consumer behaviour is vital. Monitoring these trends allows businesses to adjust their pricing strategies proactively. This includes staying updated on changes in consumer preferences and overall market conditions. By being responsive and adaptable, businesses can navigate pricing scrutiny more effectively.
How to Increase Prices the Value-Based Way
In value-based pricing, price justification centres around the benefits customers receive rather than the cost of production. Businesses charge prices based on the value their products or services provide to customers. Therefore, justifying these prices requires focusing on what customers gain rather than simply explaining costs.
For example, a small business offering specialised software can justify higher prices if the software saves clients time and boosts productivity. The price justification lies in the product’s ability to solve a specific problem, making the higher price seem reasonable. Customers are willing to pay more when they see a direct link between the price and the value they receive.
In contrast, if a business sets a high price without offering noticeable value, customers may question the price justification. A local fitness centre that increases its membership fees without upgrading facilities or services risks losing clients. The key is to ensure the value offered aligns with the price being charged.
Again, effective communication is essential in value-based pricing. Businesses must clearly explain the benefits of their offerings. For example, a boutique clothing store may justify higher prices by emphasising the uniqueness and quality of its items. Customers are more likely to accept the price when they understand the value behind it.
Moreover, businesses should continuously improve their offerings. A small bakery that raises prices after introducing organic ingredients provides strong price justification. Customers appreciate the added quality and are willing to pay more.
Pricing Recruitment For Pricing Managers!
How to Increase Prices While Guaranteeing Optimised Product Management and Stronger Price Justification
Businesses can shift their perspective on profit shaming and view it as an opportunity to enhance their offerings and pricing strategies. Instead of seeing pricing scrutiny as a negative force, they should use it to refine their approach. This shift in perspective helps companies adapt and grow.
Identifying and implementing internal improvements is crucial for addressing pricing scrutiny effectively. Businesses need to review and optimise their operations, from supply chain management to cost control measures. For example, streamlining processes and investing in new technology can help reduce costs before passing them on to consumers.
A High-Performance Pricing Team Is Essential for Mastering How to Increase Prices and Justify Them Confidently
This team should focus on navigating pricing challenges, analysing market trends, and ensuring pricing strategies align with business goals. Their expertise helps in making informed decisions and justifying price changes.
Our findings show that with the right set-up and pricing team in place, incremental earnings gains can begin to occur in less than 12 weeks. After 6 months, the team can capture at least 1.0-3.25% more margin using better price management processes. After 9-12 months, businesses often generate between 7-11% additional margin each year as they identify more complex and previously unrealised opportunities, efficiencies, and risks.
Embedding commercial capability across the organisation is also vital. This means integrating pricing strategies and customer value considerations into all levels of the company. It ensures a unified approach to pricing and enhances overall business performance. By doing so, companies can better respond to market demands and maintain a competitive edge.
Our findings show that when a business builds and embeds commercial capability across the business; bolstering its internal pricing skills and capabilities to build a sustainable pricing system, it can generate at least 3-10% additional margin each year while protecting hard-earned revenue and volume. This is at least a 30-60% profit improvement straight to the bottom line.
〉〉〉 Get Your FREE Pricing Audit 〉〉〉
Bottom Line
Manufacturing and B2B distributor businesses often face rising costs and public scrutiny. While increasing prices is sometimes necessary, it’s important to do so thoughtfully. Blanket price hikes without clear justification can alienate customers and damage trust. To navigate this challenge, companies should focus on effective communication. Clearly explain the reasons behind price increases, including specific cost factors and the value provided. Transparency helps build trust and can mitigate negative perceptions.
Additionally, businesses should explore innovative pricing strategies. Instead of across-the-board increases, consider tailored approaches that minimise the impact on price-sensitive customers. By combining clear communication, transparency, and strategic pricing, businesses can maintain customer loyalty and competitiveness, even in tough economic conditions. Addressing pricing challenges with a well-thought-out strategy ensures long-term success and customer satisfaction.
Capability Building Programmes For Pricing & Sales Teams!
How to Make a Letter Communicating Price Increases to Customers 🐖
Increasing prices in your annual price increase letter – when, why, how, by how much – is one of the most important and difficult pricing decisions you’ll ever make in a mature market.
On first glance, planning and executing a price increase can seem easy and straightforward. However, it’s not.
All businesses go through this phase when you need to explain price increases to customers. It happens when there’s a change in your industry, hence, the resources and services needed to produce your product becomes higher. Definitely, you have to tell your loyal customers that you have to raise prices. It may seem easy but the fact is, it’s not.
Many managers think that all they need to do is:
- Work out a percentage increase in price and apply the increase across the board.
- Fill out a generic price increase letter template with stock standard reasons for the increase.
- Send the price increase letter to customers a month or so before the actual price increase happens.
- Hope and pray the price increase letter doesn’t make your customers nervous and the increase goes under the radar.
Wrong!
Introduction to Price Optimisation 💰 Podcast Ep. 74!
Price increase letters and simplistic percentage increases in prices are very risky price actions. What’s more, they lead to margin loss and angry customers. I highly recommend that you don’t do this.
It takes a lot more than a cost-plus markup and a generic price increase letter to get customers to accept your price rise. The price increase letter is immaterial when the process of setting up the price rise is all wrong.
Today, we’re going to talk about how to plan and execute a price increase properly without losing customers. We will argue that the key to a successful price is not the form or structure of the price rise letter itself or how much you increase prices by. Rather the preparation and process you take before and after a price increase. Also, the process you use to make sure your prices and price increase letter are in line with the value or performance you deliver to your customers. To demonstrate this, we’ll go through a real-world case study of a B2B distribution business in Australia. By the end of this article, you’ll have a complete understanding of how to explain prices to customers in mature markets and build some lasting partnerships in the process.
In an article for Entrepreneur.com, Cardone says that customers will accept price increases, however, they don’t want to hear excuses.
I want you to think of how your business takes a price rise and issues a price increase letter to customers for a moment…
Is it a smooth process or a time of anxiety?
Does it feel like many of your customers just want low prices and tons of value (for free)?
Do you find yourself putting off difficult price increase discussions with your customers rather than passing on costs?
Price increases are not easy.
There are lots of companies with hidden profit potential taking broad-brush price increases in their respective markets hoping that they’ll fly under the radar and stick without too much bother.
A client of mine, for example, from a manufacturer and distributor of essential business supplies, was like this. Their finance team would roll out the same 3% price rise every year knowing that their customers weren’t going to react well.
Each year though, they got more and more nervous about sending out their price increase letter to customers because they were finding every time they raised their prices, their customers would quickly ask for discounts or credit notes (almost as compensation).
After a couple of years of this, however, they were feeling the pressure: Exchange rates were fluctuating, and competition in the market was intense.
They:
- Could no longer fully absorb rising raw material costs anymore and had to pass on some of these costs to the customer
- Had no choice but to increase the prices
- Needed to get a price rise through their wholesale channels to avoid a negative EBIT situation
- Didn’t know how to explain price increases to their customers or how to make sure their price increase letter didn’t create panic and disruption in the market
Key steps in the process of making a letter communicating increase in prices
Fortunately, this B2B distribution business understood that its current pricing system was far from perfect. There were a few executives in the business that were motivated to test their assumptions about their customers. There were a small group of people who wanted to develop a better pricing system to announce a price increase to customers and improve their overall pricing capability in general.
So, they formulated a small cross-functional project team and assigned roles, tasks, and responsibilities. Two team members were responsible for arranging some value discovery sessions with their most loyal customers to understand their needs. Including why they bought from them (the business), and the pains and problems they were helping their customers solve on a day-to-day basis.
One business manager set about conducting some hypothesis-driven research to test different price options to raise their prices. They were:
Option 1) Increase prices by offering less value at the same price.
Option 2) Increase prices without changing how they served the customer or what they offered only this time offering shallower discounts
Group 3) Increase prices by providing customers with additional value and charging an appropriate amount for it.
(All price trials were performed under experimental conditions and on a low-risk sample).
Smaller discounts or no discounts at all
When they monitored the output from these trials and sessions, they found that a considerable number of their customers, once across the total economic value of the deal, were content with much smaller discounts or no discounts at all. They also found that some customers in option two didn’t even notice that the discounts they received were marginally smaller than before – they were just as happy to receive some kind of concession.
These new insights into their customers enabled them to view their customers in a new light. They could see that they had also taken the value they delivered for granted like their customers. They now had a better understanding of how their business fits into their customer’s broader business strategy – and didn’t feel the need to discount as much to win or maintain customers.
It was obvious that price rise discussions were a pretty good opportunity to explain the total economic value of the deal and a good time to segment their customers based on their preferences.
To add…
Unlike any time before, they could see how they could help their customers achieve their financial objectives – whether generating more revenue, reducing cost, reducing the risk or driving innovation. As they understood their customer’s aspirations and objectives, they began to take the conversation away from line item prices to strategic problem-solving discussions.
As the project continued, the project team realised they needed a dedicated pricing team to manage and set prices on a full-time basis. They had reached as far as they could go themselves and had done great work. The project started because they wanted to improve how they explained price increases to customers. Now the project was something much bigger. They wouldn’t be able to explain price increases to customers unless their price architecture, strategy, and people were set up properly too.
It was now time to hire specialist pricing talent in the business to run pricing for the business on a full-time basis. They then set up and hired a small team of 1 x strategic pricing managers and 2 x analysts to manage $300M revenue (as the first test case).
Breakthrough: The team later grew in size as they took on more revenue to manage. They now have a pricing function of well over 20 people and growing.
Within the first 100 days, the team reviewed the business’ price architecture. They started with its list price and discount structure. They found that their prices were all over the place! Price ranges were everywhere, with lots of outliers and RRP (recommended retail price) that were way too high and some that were way too low.
It quickly became apparent that the average selling price was falling each time they issued a price rise letter. Because there was no price variation across SKUs. Pass-through rates were low and price dispersion by SKU was wide. The top 10% of their portfolio was their high-value and top-selling products. They also had a long of list products outside the top 10%. So they didn’t know which ones were generating profit for the business.
So the new pricing team changed its approach to pricing and introduced SKU price optimisation techniques to set variable price increases across their long tail of SKUs. Part of this involved redesigning their product data hierarchy. This includes price elasticity modelling and re-classifying their products into standard commodity items, traffic volume drivers and profit generators. From here, they introduced tactical discounting and set up active rebates with suppliers to ensure agreements were maximising margins.
Overall, the initial price improvement project and pricing team intervention generated a .5% additional margin for the business in less than six months. Approximately, $1.5M – covering, in turn, the cost of the program and new pricing team many times over.
Pricing Recruitment For Pricing Managers!
Implications
If your customers don’t understand (or have forgotten temporarily) the value you deliver them, then they will not take a price rise well – even if you have a well-crafted price rise letter.
If you haven’t reminded or sold the total economic value of the deal to your customers and then decide to take an X per cent price increase across the board, it’s guaranteed that customers will complain and focus on the price increase and not the value of the deal.
〉〉〉 Get Your FREE Pricing Audit 〉〉〉
Conclusion
In this article, we discussed how to take a price increase in a mature market. We walked through a real-world case study of a B2B distribution business. Also, we looked at the key steps they took to explain their price increases to customers. That the key to a successful price is not the form or structure of the price rise letter itself or how much you increase prices.
Rather, it’s the preparation and process you take before, during and after a price increase. This refers to the process you use to make sure your prices and increases are in line with the value or performance you deliver to your customers. It’s important that you handle a price increase fast and in a genuine manner to ensure that your customers understand the situation and are willing to stick through it.
We found that a well-structured price rise should provide you with options. This includes the trade-offs of each option and guidance on:
- Where to move
- How much to increase prices
- How to configure a deal to benefit you and your customers.
It’s important that you handle a price increase fast and in a genuine manner to ensure that your customers understand the situation and are willing to stick through it.
Capability Building Programmes For Pricing & Sales Teams!
How To Increase Prices of Food Without Losing Customers Using Value-Based Strategies 🥨
Analysts forecast that United Kingdom’s inflation rate will soon be driven more by food prices than energy. This follows after multiple studies claiming that the average price of food and non-alcoholic beverages has increased dramatically for the first time in more than 45 years. In fact, the average prices increased by 19.2% over the course of just one year. Companies are looking for better food pricing strategies to stay profitable as higher prices put a strain on household budgets.
The problem is though, raising prices may lead to decreased customer loyalty and revenue due to customer resistance. It is important to carefully consider all implications prior to raising prices in order to minimise any negative effects. Hence, businesses should carefully consider their pricing strategy, taking into account customer feedback and market research when making decisions.
In this article, we are going to discuss food pricing strategies to help businesses keep customers despite pricing increases. First, we examine the UK food price trends and provide an explanation for why they are occurring. Then, using a value-based pricing strategy, we recommend ways to make higher prices more reasonable to customers. We argue that an in-depth comprehension of customer value is essential for successful pricing increases.
At Taylor Wells, we believe food companies can adopt price rises without eventually losing customers if they use customer-focused and value-based food pricing strategies. By the end, you’ll be knowledgeable about the best means of enabling firms to survive any financial challenges.
Capability Building Programmes For Pricing & Sales Teams!
The Reason Why Food Businesses In The UK Need New Pricing Increase Strategies
Facing rising expenses for operations, food businesses in the United Kingdom are finding it difficult to raise prices out of fear that customers may quit patronising. Business owners believe maintaining consumer satisfaction has become a significant problem as food prices are rising at the fastest rate since 1977.
For instance, the average price of a fish meal has increased by £1.44, or roughly a fifth, over the past year, to £9. A large cod and chips now cost £9.50 in one particular store in the London suburbs. Why is this happening? The cost of energy has tripled. At £195 per crate, cod prices are up over 80%. The price of potatoes has also gone up by about 60% due to supply issues brought on by the drought last summer.
Takeout or fast food is typically inexpensive, but according to Office of National Statistics data, prices increased 13% in the year leading up to March. Burgers and kebabs increased by 17% and 14% respectively, but fish and chips showed the greatest increase, at 19%. Food prices rose 10% in restaurants, but the most notable was a 19% increase in grocery prices at the supermarket.
Importance Value-Based Pricing during Inflation 💰 Podcast Ep. 98!
Another pressing concern is why prices for food are rising in the UK right now. Compared to before the war, gas prices are now lower. The Food and Agriculture Organisation reports that global food prices are also significantly lower. Costs are going down, while prices are going up. Experts claim that ‘greedflation’ is to blame for this peculiar situation.
What to Do When Your Food Pricing Strategies Backfire—and How to Increase Prices Without Losing Trust
When food pricing strategies backfire, swift and strategic action is essential to regain customer trust and protect profitability. We recommend the following steps to address and rectify pricing missteps:
1. Assess the Impact — Begin by evaluating the effects of the pricing strategy. Have sales declined? Are customers expressing dissatisfaction? For instance, implementing dynamic pricing without clear communication can lead to customer backlash, as seen when Wendy’s faced criticism for its surge pricing plans.
2. Gather Customer Feedback — Engage with your customers to understand their perceptions. Utilise surveys, social media, and direct communication to gather insights. This feedback is invaluable for refining your food pricing strategies to better align with customer expectations.
3. Re-evaluate Pricing Models — Analyse your current pricing approach. Are you overcomplicating pricing structures or failing to consider competitors’ pricing? Simplifying pricing and ensuring it reflects market conditions can enhance transparency and customer satisfaction.
4. Implement Transparent Communication — Clearly articulate the value proposition of your offerings. Avoid hidden costs and ensure that any changes in pricing are communicated effectively to maintain trust.
5. Monitor and Adjust Regularly — Continuously monitor the performance of your pricing strategies. Be prepared to make adjustments in response to market changes, cost fluctuations, and customer feedback. Regular reviews help in maintaining the effectiveness of your pricing approach.
Avoid These Common Mistakes in Food Pricing Strategies
Avoiding common mistakes in food pricing strategies is crucial for maintaining profitability and customer trust. Here are key pitfalls to watch out for:
1. Overlooking Ingredient Costs — Neglecting minor ingredients like spices or oils can lead to underpricing. For instance, not accounting for the cost of a tablespoon of olive oil in a dish may seem negligible, but over time, these costs accumulate. Ensure every component is included in your food pricing strategies to accurately reflect true costs.
2. Inconsistent Portion Control — Variations in serving sizes can cause fluctuating costs and customer dissatisfaction. Implementing standardised portion sizes ensures consistency, aiding in precise food pricing strategies and enhancing customer experience.
3. Ignoring Waste and Spoilage — Failing to account for food waste and spoilage can erode profits. Regularly track inventory and adjust pricing to factor in these losses, ensuring your food pricing strategies remain sustainable.
4. Not Updating Costs Regularly — Ingredient prices fluctuate due to market conditions. If you don’t regularly update your food pricing strategies to reflect these changes, you risk underpricing your dishes, affecting profitability.
5. Neglecting Labour and Overhead Costs — Focusing solely on ingredient costs overlooks significant expenses like labour, rent, and utilities. Incorporate these into your food pricing strategies to ensure comprehensive cost coverage.
Discussion On How To Increase Food Pricing Without Losing Customers Using Value-Based Strategies
Analysts refer to “greedflation” when businesses take advantage of inflation as a justification for raising profit margins. The UK is “in the grip of a profiteering crisis,” according to Unite’s general secretary Sharon Graham.
This assertion has been backed up by the Bank of England, which noted that its nationwide network of agents had discovered declining costs at some businesses were not automatically reflected in consumer pricing in an effort to restore profit margins. On the other hand, the former chief executive of Sainsbury’s, Justin King, disagrees, arguing that rather than making a profit, retailers are already subsidising food prices.
In spite of this debate, one thing is certain. It is uncommon for food prices to go backwards in the UK. Long-term contracts are used by producers and merchants, so the price is only changed when the contract expires and is renegotiated. Although inflation will eventually decline for consumers, it will no longer be possible to return to previous price levels.
Food prices rise behind the average cost of living, which means it tends to become less expensive over time, but once a price rise occurs it tends to stick. The question is, how will food businesses manage amidst higher costs and make higher prices more acceptable to their customers?
How food businesses in the UK can navigate food price inflation?
In the food industry, implementing price increases require a strategic approach that takes into consideration customer needs and values. Value-based food pricing strategies offer businesses the opportunity to maximise revenue and profits while still delivering a quality product and service.
Value-based food pricing strategies take into account the customer’s perception of value when setting prices. By taking the time to understand their customers’ needs, food businesses can create products that provide greater value than those offered by their competitors, allowing them to justify higher prices. Additionally, by being able to demonstrate the value they offer, food businesses can make price increases more palatable to their customers and increase customer satisfaction.
How businesses can use value-based pricing amid rising food prices in the UK?
Value-based food pricing strategies are based on the idea that customers are willing to pay what they perceive the product or service to be worth. This means that when prices increase, a business can still maintain its customer base by emphasising the value of its product or service.
When increasing prices, food businesses should focus on communicating why their products are worth the extra cost to customers. They can do this by highlighting the quality of ingredients, unique features, or special services offered with each purchase.
Additionally, customers may be willing to pay more if a business is transparent about how its prices increase due to increased costs or a need to invest in resources, such as staff or research and development. Making this information available can help customers understand the reasons behind price increases and will likely make them more willing to pay the extra cost.
For example, a restaurant may charge premium prices for its signature dishes made with high-quality ingredients. A fast food chain may charge more for its meals with added extras such as drinks, desserts, and side dishes. A grocery store may charge a higher price for ready-made meals or convenience items like pre-cut vegetables. By charging a premium price for products that offer superior value, food businesses can increase their sales and profits while delighting customers with the value they receive.
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Implications Of Value-Based Food Pricing Strategies
Creating a pricing strategy that takes into account customer values is essential for any food business looking to implement price increases. By using value-based pricing, these businesses can ensure that their prices reflect the value of their products and services, enabling them to stay competitive and remain profitable.
To ensure that you can formulate the right food pricing strategies tailored to your business, you have to have a high-performance pricing team.
Our findings show that with the right set-up and pricing team in place, incremental earnings gains can begin to occur in less than 12 weeks. After 6 months, the team can capture at least 1.0-3.25% more margin using better price management processes. After 9-12 months, businesses often generate between 7-11% additional margin each year as they identify more complex and previously unrealised opportunities, efficiencies, and risks.
It’s important to understand that price increases aren’t always necessary for a food business to succeed. However, when they are necessary, value-based pricing can be an effective tool for helping food businesses implement these increases in a way that is beneficial to both the business and its customers. By understanding their customers’ needs and values, businesses can create price increases that enable them to remain profitable without losing the loyalty of their customers.
In this unpredictable economy and when price increases are necessary, it is essential for companies to further develop their commercial capabilities.
In fact, our findings show that when a business builds and embeds commercial capability across the business; bolstering its internal pricing skills and capabilities to build a sustainable pricing system, it can generate at least 3-10% additional margin each year while protecting hard-earned revenue and volume. This is at least a 30-60% profit improvement straight to the bottom line.
In order to successfully implement value-based pricing, businesses should take into account the cost of production, market forces, customer preferences and segmentation. Additionally, it is important to understand competitive positioning and adjust prices accordingly. Businesses must also ensure that customers are aware of the superior value that is being offered in order to maximise consumer appeal.
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Bottom Line
Businesses in the UK are facing tough times with rising food prices that strain their ability to generate profits and stay afloat. As customers can be resistant to price increases, businesses need to reappraise their food pricing strategies and focus on value-based pricing. This involves identifying the value of products, services, or experiences for customers and setting prices based on the value they receive.
This approach is a more efficient way of increasing prices that customers are likely to accept as it offers them tangible benefits and rewards. By optimising pricing strategies and focusing on value-based pricing, businesses can make the necessary adjustments to stay competitive and profitable in the long run.
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How to Transparently Tell Customers About Price Increases 💰
All industries regularly change up their pricing to keep up with demand and supply changes. Changing customer tastes and preferences also gives opportunities for some brands to maximise their pricing capability. But not all companies are able to have price transparency with their increases.
Most of them do this without informing customers. But what does that do to customer loyalty and trust? And when is it okay to raise prices?
Since a significant proportion of customers are price-sensitive, telling your customers about a price increase is easier said than done. Raise prices too high or pull out promotional offers and you may just upset your customers. So, how do you find the balance?
In this article, we guide you on how to communicate raising prices to customers in ways that don’t sacrifice quality over your pricing. We show you how shifting the narrative of your focus can bring the right outcomes.
At Taylor Wells, we believe that a value-based customer-centric approach is key to staying in business and elevating brand visibility. We argue that even if letting customers know about price changes can be unpleasant, there are right ways to do it.
If you factor in empathy, pay attention to details, and remain sincere, you send out the message that customers are your valued partners.
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What is price transparency and when should you raise prices?
1. To respond to competition – If competitors are offering their prices at a lower or higher rate, you need to keep up. Most businesses also do this to acquire a larger market share while taking advantage of seasonal sales. It’s a surefire way to secure margins, revenue, and profit earnings.
2. Inflation – When there are rising costs and trading is affected all over the world, it becomes a domino effect among industries.
The same thing happened during consecutive Covid-19 lockdowns and restrictions, causing delays in manufacturing deliveries and shortages. This, in turn, led suppliers and shipping industries to raise prices, passing the impact on to customers.
3. Supply shortage – If there is a shortage in your inventory due to increasing demand or other imbalances in the supply-demand equilibrium, then it is appropriate to raise prices.
This happened during the start of the pandemic when people raced to empty the shelves of supermarkets. Raising prices, in this case, helps mitigate panic buying and the unequal distribution of goods and services.
Introduction to Value Culture 💡 Podcast Ep. 96!
How do brands raise their prices?
First, there are ways that companies do this in a less alarming manner.
In packaged items commonly seen in groceries, companies often reduce the weight or volume of the packages without lowering the price. From cereal boxes to sugar and soft drinks, it has become to be known as shrinkflation.
Other companies may strategise by lessening discounts, promotional offers, and incentives to respond to supply challenges, raising prices – but indirectly. This often happens for “budget savers meal” in fast food chains.
But what about services that are leased, contractual, or subscription-based? How do they approach how to increase prices in these models—and do they practise true price transparency?
Companies do this by applying new charges on the next billing cycle. But they must let their customers know beforehand. How it is communicated is crucial and it can get tricky.
Do it tactlessly and companies risk losing out customers to competitors. It may result in customer complaints publicised through social media. And oftentimes, public outrage due to price hikes eventually pushed companies to roll back their price decision.
Below are 3 ways to help you communicate your price transparency increase without upsetting customers:
Avoid euphemism
Brand giants like Netflix, YouTube, Apple, and Microsoft used price updates or adjustments to label their price increase. This didn’t work especially for loyal customers.
And it is backed by research that to avoid damaging your customer relationship management, it’s best to present price hikes in an informative, authentic, and transparent communication. Or in a way that helps them understand your reasoning better.
Euphemising and blurring the “bad news” doesn’t help customers receive the brunt of it any better. It only makes them more suspicious and feel deceived about why there is a price increase.
Why is this?
Often, using the same monotonous and quick announcement irks customers. Worse, a third-person point of view sends out the message of lack of empathy, basically leaving them confused.
What is Price Transparency? Be straightforward
Most business owners are reluctant to clearly communicate their pricing. In turn, this can result in public outbursts and bad customer reviews that can eventually influence the inability to retain customers if they’re not addressed right away.
For software companies, a regular price assessment that responds to market trends, customer needs, and shareholders will base its decisions on price analysis and feedback.
A recent study indicates that how customers interpret the “fairness” of the price increase is the second factor of the chain of their reactions. If they don’t think it’s justified, then they won’t likely respond well to it.
Take for instance, how Microsoft announced its Microsoft 365 20% price increase effective March this year for customers who paid monthly, instead of annually. It was done to lock in more customers and revenue with extended arrangements. Either their customers will pay 20% more, or they take the annual subscription price.
“In 2022, Microsoft is rolling out the New Commerce Experience for Office, revamping its software through business partners. It has informed partners that organisations paying by the month will face a 20% hike unless they move to annual subscriptions.”
Obviously, this upset many clients and ensued social media outrage. But luckily, for Microsoft, there are many companies that preferred not to spend more time on training their staff in using new software or other Microsoft competitors.
But compare it to Oxford Pennant who communicated a price hike in this way:
“Darn it! We’re raising prices on October 15th. Almost all of our material suppliers raised their prices this year. Price increases suck! But we’re dedicated to making it with US-sourced materials. You still have a couple of weeks to order before October 15 and receive our old prices even if it ships after the 15th.
We’re always here if you have questions. Now, when are you coming to visit?
All the best,
The Oxford Pennant team”
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The Shift Toward Price Transparency Is Reshaping How to Increase Prices Through a Value-Based, Customer-Centric Lens
You would want to highlight the optimal experience that customers will receive such as new features and product/service improvement. This also helps you find cross-selling opportunities as you improve the quality of your offerings. Otherwise, customers can feel that the move is just another profiteering or price gouging act.
1. For instance, a major U.S. airline had to increase its club membership prices. They announced the price change in this way:
“With our $100 million investment, we want to provide you with more opportunities to relax and receive the best experience onboard with us. We’re upgrading our new complimentary food locations that are now easily accessible across the country. We’re also renovating seating and space expansions, acquiring better Wi-fi service, and adding more power outlets during your flight.”
The reasoning and communication were crafted in a transparent manner that centralises on the customer’s story. Rather than a generalised “We are increasing prices effective next month,” it highlights what customers are getting at the tail end of the price hike.
This presents itself as a vital customer added-value which shows that the pricing management, finance, and marketing teams put effort and care about honing in on the customer’s experience and value drivers.
2. Take the example of a gift shop that went as far as to take the blame for a customer forgetting her friend’s birthday. She didn’t take the offer but she really appreciated how the gift shop’s salespeople were more than just salespersons.
The following year, the gift shop reminded the customer about her friend’s birthday, via e-mail. Of course, the price was much higher than its competitors. But the value, care, and thoughtful effort that was put into the experience was definitely worth the price.
3. In the food industry, to keep operating during the pandemic, many businesses had to increase costs. Restaurants had to pass on the costs to customers due to meat supply shortages, delivery expenses, and sanitation measures at the beginning of Covid-19.
To elaborate, a pizzeria in Montreal was rather blunt in communicating the extra fees for their restaurant’s rising costs. As a result, some customers voiced their outrage via social media. They felt the extra fees were unreasonable especially during a global crisis.
This could have been communicated better. But the protests eventually pushed the pizzeria to remove the extra costs for alcohol, wipes, and other disinfecting protocols.
Bottom Line
Supply shortages, the rise of overall costs, inflation, and the journey back to a pre-pandemic economy is naturally everybody’s concern when thinking of price transparency.
And as such, customers hate businesses that only focus on money. So, to increase prices without losing customers, you have to remind them why they started a relationship with you.
Why do they choose your brand? What sets you apart from your competitors? And what keeps them returning?
Is it your value proposition, your pricing, or customer relationship management? It could be your customer service or the social causes that you support.
But one thing’s for sure. Renewing your partnership with customers often ensures that you keep up with the market competition while keeping your brand sustainable. After all, it’s the customers that continue to keep you in business.
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How SaaS Vendors Can Justify Price Increases and Keep Clients Happy 🤝
Recent data shows SaaS price increases of 9 to 25 per cent this year—well above inflation and the modest 2.8 per cent rise in client IT budgets. These jumps might look good in quarterly reports, but they also put real strain on customers’ ability to plan. For many organisations, software now consumes a larger share of their technology budgets, leaving less room for innovation or upgrades elsewhere.
This widening gap between vendor pricing and client affordability is creating tension that steadily erodes loyalty—especially when vendors fail to think carefully about how to increase prices without overreaching. Clients that once renewed automatically are now consolidating licences, cutting non-essential tools, or negotiating harder. When software becomes a financial pressure point rather than a productivity enabler, trust starts to slip. In the long run, rebuilding that trust is far harder than recovering a few margin points gained today.
What’s Really Behind the Current SaaS Price Increases
The reasons behind these SaaS price increases go beyond simple inflation or currency shifts. Many vendors are revising their pricing metrics—charging by active users instead of seats, or by consumption instead of capacity. Others are repackaging existing licences into “premium” bundles with AI add-ons, making it harder for customers to opt out of features they don’t need.
Hidden costs are also rising, especially as generative AI capabilities are integrated into standard plans. These often carry new fees that aren’t obvious upfront. On top of that, multipliers—systems that assign credit values to services—allow vendors to change the cost of a feature overnight. A service worth ten credits can suddenly require twenty, doubling the price instantly. Clients burn through credits faster, face unexpected overage charges, and lose confidence in what they’re actually paying for—posing real risks to SaaS customer retention and overall trust.
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When Complicated Pricing Hurts SaaS Customer Retention
As SaaS price increases continue and pricing models become more intricate, transparency often declines—particularly when companies lack a clear framework for how to increase prices responsibly. Businesses that once valued SaaS for its predictability now find billing unpredictable and confusing. When pricing structures become overly complex, even legitimate adjustments appear suspicious. This lack of clarity fuels perceptions of unfairness, damaging long-term relationships and weakening SaaS customer retention.
In B2B markets, perception is reality. Once customers start questioning whether they’re being overcharged, the trust that supports renewal decisions begins to unravel. Complexity may protect margins in the short term, but it also drives clients to seek simpler, more transparent competitors—a signal for vendors to rethink their SaaS customer success strategy. In subscription industries, consistency is as valuable as innovation.
You need the Right Numbers for Pricing! 👍 Podcast Ep. 66!
How Customer Pushback Is Forcing Fairer SaaS Pricing Strategies
Buyers are no longer passive. More businesses are conducting internal audits to track usage and identify redundant tools. They’re consolidating platforms, shifting workloads, and aligning renewal dates to strengthen negotiation positions. Some are even forming software governance committees to review vendor contracts and challenge unjustified SaaS price increases.
This rising sophistication among clients signals a major shift in market dynamics. Procurement teams now enter renewal discussions better informed and far less tolerant of vague explanations. Vendors that do not clearly understand how to increase prices—and how to justify those increases with evidence—risk being replaced. Price pressure is no longer temporary; it is a defining feature of the modern SaaS relationship. Vendors that align their SaaS sales strategy with transparency and demonstrated customer value strengthen loyalty and protect long-term growth.
How Pricing Teams Can Justify SaaS Price Increases Without Losing Trust
For pricing teams, SaaS price increases made simply because the market allows it are unsustainable. Every increase must be backed by demonstrable value and explained in a way customers understand. Transparent, usage-based models that scale naturally with consumption help prevent resentment while maintaining profitability.
Teams should also simplify pricing language and visualise cost structures in ways clients can easily follow. Running pilot programs and collecting feedback before a full rollout can reveal where customers feel blindsided. Predictable, fair pricing strengthens SaaS customer retention—and credibility is what drives renewals and upsells. The most successful pricing teams know that a clear SaaS customer success strategy builds consistency, which becomes a lasting competitive advantage.
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How Executives Can Align SaaS Sales Strategy with Sustainable Growth
Executives must view SaaS price increases through a strategic lens, not just a financial one—especially when deciding how to increase prices without damaging long-term value. Short-term revenue wins mean little if they come at the cost of lasting relationships. Sustainable pricing links profit goals with customer success, ensuring every SaaS sales strategy reflects real, delivered value. This requires close collaboration across pricing, product, and sales teams so that any price adjustment aligns with measurable customer outcomes.
Leaders can also invest in clearer communication frameworks—like renewal transparency, flexible billing cycles, or multi-year pricing guarantees—to show commitment to client stability. In volatile markets, vendors who demonstrate empathy and foresight will strengthen SaaS customer retention, even when others lose clients to price fatigue. Profitability and fairness can—and should—coexist.
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Sustainable Pricing Strengthens SaaS Customer Success Strategy
Sustainable pricing is a real differentiator in managing SaaS price increases. Vendors who keep pricing fair, predictable, and transparent earn stronger loyalty and reputation. Customers remember those who treated them fairly and reward them with ongoing business, driving long-term SaaS customer retention.
Fair pricing isn’t a weakness—it’s a growth strategy. As subscription markets mature, clients will favour partners who show reliability, not just capability. Vendors who build resilience into their SaaS sales strategy today will strengthen their position tomorrow. In a recurring revenue model, lasting success depends on one thing: trust.
If you’re rethinking how your pricing supports your customers and business goals, now is the time to act—especially if you are evaluating how to increase prices without undermining retention. Our team helps organisations design pricing models that are fair, sustainable, and tightly aligned with customer value. Together, we can strike the right balance between growth and resilience. Let’s start a conversation about turning your pricing into a lasting competitive advantage, supported by a stronger customer success strategy in SaaS.
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How to Increase Your Prices Without Losing Customers in a Small Business 🐌
Price increases affect businesses of all sizes, including small ones. Cadbury recently doubled the price of Freddo Frogs and Caramello Koalas, causing frustration among Australian consumers. While Cadbury cites rising costs, customers express shock. This reaction shows how important it is for businesses, especially small ones, to handle pricing carefully. Cadbury’s situation offers valuable lessons for small businesses planning price changes. How to raise prices without losing customers in a small business?
Sudden price increases create several challenges, especially for small businesses with a fragile customer base. Customers may feel blindsided, leading to dissatisfaction and possible loss of loyalty. They may also perceive the business as unfair. As a result, businesses risk losing repeat buyers, which can hurt long-term growth and revenue stability.
In this article, we explain how to increase prices without losing customers in a small business context. First, we outline the risks of sudden price hikes, including customer frustration and loss of loyalty. Then, we explore the benefits of gradual adjustments, such as smoother transitions and stronger customer management. Ultimately, we argue that a careful, well-communicated approach—supported by visible added value—protects trust while improving profitability.
At Value Culture, we believe that planning price changes well can lead to better customer retention and increased revenue. By the end, you will know how to raise prices effectively without losing customers.
A Guide for Small Businesses on How to Raise Your Prices Without Losing Customers
Cadbury’s decision to double the price of Freddo Frogs and Caramello Koalas stems from rising global cocoa prices and higher production costs. This price hike, the first in over a decade, has shocked many Australians. While Cadbury is transparent about the reasons behind the increase, it has not eased consumer frustration. The sudden jump from $1 to $2 feels abrupt to customers.
For small businesses, sudden price increases pose significant risks. Customers often feel a strong attachment to familiar products. When prices rise without warning, that attachment can quickly turn to frustration. Consumers expect stability, especially from businesses they trust. A small café that suddenly raises coffee prices by 50% without explanation might face immediate backlash. Even loyal customers may choose to go elsewhere, feeling betrayed by the unexpected jump.
Cadbury’s experience highlights how abrupt price changes can alienate customers. Social media reactions show that many people find the increase excessive. Some even vowed to stop buying the products altogether. This kind of backlash is especially risky for small businesses with less brand power to absorb customer losses.
When prices rise suddenly, customers often perceive a gap between the price and the product’s actual value. They may feel they are getting less for their money. In Cadbury’s case, customers question whether the chocolates have shrunk in size, adding to their dissatisfaction. This perceived imbalance can lead to negative reviews and declining sales.
Finally, sudden price increases can erode brand loyalty—especially when there is no clear strategy for how to increase prices thoughtfully. When customers feel blindsided or undervalued, trust breaks down. For small businesses, this is particularly damaging because they rely heavily on repeat business and word-of-mouth referrals. Gradual, well-communicated adjustments protect customer trust and preserve loyalty, supporting long-term success.
How to Raise Your Prices Without Losing Customers for Small Business Owners
Gradual price adjustments help manage customer expectations and reduce negative reactions—especially when you understand how to increase prices in a controlled way. By phasing in changes, businesses give customers time to adapt and avoid the shock of a sudden hike. Clear communication about the reasons behind the adjustment, such as rising costs or improved product quality, is essential to maintaining trust. Transparency reinforces the value customers receive and makes the increase easier to accept.
Additionally, phased price increases or adding value to products or services can preserve customer relationships and loyalty. For small businesses, this approach ensures that customers feel respected and remain loyal, even when prices need to rise due to external pressures.
How to Raise Your Prices Without Losing Customers Using Gradual and Value-Added Pricing Techniques
Here are five steps on how to raise prices without losing customers for small businesses. Each strategy helps small businesses balance the need for higher prices with maintaining customer satisfaction.
1. Incremental Increases
A gradual approach to price increases is often the best way to avoid overwhelming customers. Instead of a sudden 20% jump, small businesses can raise prices in smaller increments over time. For example, a café may increase the price of a popular coffee by 5% every few months. This strategy helps customers adjust gradually and reduces the likelihood of strong negative reactions.
Testing customer response after each small increase is key. If the response is positive or neutral, the business can proceed with the next increment. However, if customers begin to push back, the business can reevaluate or slow down the increases.
2. Transparent Communication Communication
Customers need to understand why prices are increasing. Being upfront and transparent about the reasons behind price changes can build trust. For example, if a local bakery needs to raise prices due to rising ingredient costs, they can send a newsletter explaining the situation.
Transparency about rising supplier fees or labour costs helps customers understand the reasoning, making them more likely to accept the changes. It’s also helpful to highlight any additional benefits they will receive, such as maintaining product quality. Clear, honest communication reassures customers that the price increase is necessary, not arbitrary.
3. Adding Value
When increasing prices, small businesses can justify the change by enhancing the value of their products or services. A clear plan for how to increase prices should always include visible improvements. Offering additional features or improved experiences helps customers feel they are still receiving a good deal. For instance, a small hair salon raising prices might provide complimentary scalp massages or refreshments during appointments. These extras create a more positive experience and make the price adjustment feel fair and justified.
By adding value, businesses soften the impact of price increases and foster customer loyalty. Enhancing the overall experience makes customers feel valued and more willing to accept higher prices.
How to Understand Perceptions of Value and Master How to Increase Prices Without Losing Customers
To raise prices without losing customers, small businesses must first understand what their customers value most. Knowing how to increase prices starts with insight, not instinct. This can be achieved through several strategies. Surveys, for example, are an effective way to gather direct feedback on customer preferences, priorities, and perceptions of current pricing. This information helps businesses identify where they can strengthen value before adjusting price.
Engaging in informal conversations at the point of sale is another valuable tool. Casual interactions allow businesses to gauge customer sentiment and discover unmet needs, fostering a friendly and open environment for communication.
Analysing customer behavior provides further insights. Monitoring purchase patterns can reveal which products or services customers deem valuable, helping businesses focus their efforts on offerings that matter most to their audience.
Testing various pricing strategies, such as limited-time promotions or product bundles, also offers insights into customer responses to price changes. By reviewing buying decisions during these tests, businesses can identify which approaches resonate most.
Finally, monitoring online reviews and social media feedback gives an unfiltered look at customer opinions. Engaging with this feedback allows businesses to stay attuned to customer needs and adjust their offerings accordingly.
How to Craft a Compelling Value Proposition and Raise Prices Without Losing Customers
When increasing prices, businesses must clearly communicate why their products or services are worth more. A compelling value proposition ensures customers understand how the new price aligns with the enhanced product or service.
For example, a small business that sells skincare products might develop a new formula with higher-quality ingredients. The price increase would then reflect better results, longer-lasting use, or improved skin protection. By focusing on these added benefits, businesses demonstrate the value behind the price increase, making it easier for customers to accept the change.
Aligning prices with the value offered is crucial, especially when considering how to increase prices sustainably. Customers need to see a clear connection between what they pay and the benefits they receive. A boutique clothing store, for instance, might shift to sustainably sourced fabrics. The higher price then reflects superior quality and environmental benefits, reinforcing that customers are paying for added value—not simply absorbing higher costs.
4. Phased Rollouts
Introducing price increases gradually, by phasing them out across different product lines or service tiers, can also help small businesses avoid backlash. For example, a gym could first raise prices on premium memberships before adjusting standard ones. This approach allows the business to test the waters and adjust as needed before implementing changes across all offerings.
It also gives customers who are more price-sensitive time to prepare for the adjustments. Phased rollouts give businesses flexibility to make adjustments along the way, based on how customers respond to each phase of the increase.
5. Customer Feedback and Engagement
Finally, actively seeking and listening to customer feedback during price changes can help businesses manage the process effectively. Small businesses can use surveys, emails, or even face-to-face conversations to gauge customer sentiment about the increases.
For instance, a local retailer can ask regular customers how they feel about recent price changes or seek input before introducing new ones. These conversations provide practical insight into how to increase prices without triggering resistance. Engaging with customers shows the business values their opinions and is willing to adjust if necessary. It also delivers valuable feedback to refine pricing strategy and strengthen long-term customer loyalty.
Planning How to Increase Prices—and Communicating It Without Losing Customers
Small businesses need a focused pricing strategy to stay competitive and grow sustainably. Understanding how to increase prices at the right time is part of that discipline. A well-considered pricing plan helps balance profitability with customer satisfaction. By setting and adjusting prices strategically, small businesses can retain the right customers, which is critical for long-term success. When prices are too high, customers feel alienated. However, when prices are too low, revenue suffers and value perception declines.
A focused pricing strategy also helps optimise revenue. Businesses can adjust prices based on demand, costs, and customer expectations. For example, a bakery can offer premium options at higher prices while keeping staple items affordable. This approach targets different customer segments and maximises sales.
Moreover, a clear pricing plan helps businesses communicate value to customers. By explaining the reasons behind their prices, businesses build trust and transparency. Customers are more likely to stay loyal when they understand how a company sets its prices and feel they are getting a good deal.
Small- and medium-sized firm employees frequently have their hands full of workloads. However, our findings show that with the right set-up, clear pricing plans, and a structured understanding of how to increase prices, incremental earnings gains can begin in less than 12 weeks. After six months, teams can capture at least 1.0–3.25% more margin using stronger price management processes. By nine to twelve months, businesses often generate between 7–11% additional margin each year as they uncover more complex and previously unrealised opportunities, efficiencies, and risks.
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Bottom Line
Sudden price increases can harm small businesses, especially when owners are unsure how to increase prices strategically. They often lead to customer frustration, hurt brand loyalty, and damage trust. A more measured approach, grounded in knowing how to increase prices thoughtfully, such as gradual adjustments, helps manage customer expectations and reduces negative reactions. Transparent communication and adding value also maintain trust.
In essence, small businesses should consider these strategies when adjusting prices. This approach not only ensures smoother transitions but also supports long-term success. By balancing profitability with customer satisfaction, businesses can grow sustainably while keeping their loyal customers happy. Proper planning is key to a strong pricing strategy.
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Price Increase: The Strange Pricing History Of Coca-Cola 🥤
In modern pricing and investment circles, pricing power is often regarded as the holy grail, meaning the ability to consistently adjust prices whilst growing profitability. Great investors like Warren Buffet regard it as a key component of their investment portfolios – as it demonstrates a strong brand or market presence.
He quoted, ” The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 per cent, then you’ve got a terrible business.”
One of his most famous investments is in Coca-Cola. Although, the strange thing is that for most of its history, Coca-Cola did not implement a single price increase at all.
Why Did Coca-Cola Choose Not to Increase Prices—and What It Reveals About How to Increase Prices Strategically?
The price of a 6.5-ounce bottle of Coke was set at 5 cents from 1886 to 1959. That’s more than 70 years of nominal price rigidity! Isn’t it interesting to note that they were able to maintain that price despite the events that occurred during the 70-year period? The founding of another soft drink industry happened around that time. Let’s not forget, of course, World War I and II, the Great Depression, changing taxes and numerous regulatory interventions. Still, the nickel price of Coca-Cola never changed.
It started in 1899 when two lawyers from Chattanooga, Tennessee went to Asa Candler (Coca-Cola President) to buy Coca-Cola bottling rights. Candler sold the rights to the two lawyers for one dollar. It is surmised that Candler sold the bottling rights cheaply because, during that time, soda fountains were prevalent in the United States. He thought that bottling will never thrive. In the contract, he was granted the ability to “pull their franchise if they ever sold an inferior product”. Unluckily, the agreed-upon price of the contract had no expiration date. Thus, Candler had basically agreed to sell Coca-Cola at the same price forever.
As opposed to Candler’s belief that bottling will not flourish, it did in 1928. It even surpassed fountain sales. Consequently, Coca-Cola had to sell their product for a fixed price for having a non-expiring contract. What they could only do was maximise the number of products sold but minimise the price. In order to achieve that, Coca-Cola began a vigorous marketing campaign to associate its product with the five-cent price tag. They provided incentives for retailers to sell at the same price. The campaign was a great success. In 1921, Coca-Cola was able to renegotiate the bottling contract. The five-cent price remained for over three more decades (the late 1950s).
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Technical Constraints Restricting a Price Increase—and What They Reveal About How to Increase Prices Effectively
Another factor that prevented Coca-Cola from increasing its price aside from the non-expiring contract was the single-coin vending machine technology. It limited the company’s price adjustment options because vending machines were not capable of dispensing change. Hence, increasing prices was extremely difficult due to the capital expense of updating the machines.
Coca-Cola owned over 85% of the 460,000 vending machines in the United States in 1950. These vending machines were estimated between $286 million and $900 million (in 1992 dollars) based on vending machine prices at the time. The Coca-Cola company believed that it would reduce their sales and cost money to require multiple coins (e.g., six pennies or one nickel and one penny for six-cent Coke). Since they were reluctant to double the price, they were forced to keep the price of Coca-Cola at five cents.
The company, however, still explored increasingly innovative ideas to increase its price. In 1953, they even approached the U.S. Treasury Department and requested that they mint a 7.5-cent coin. The Treasury did not grant their request. Coca-Cola attempted again for a price increase. Briefly, they implemented a strategy where one in every nine vending machine bottles was empty. They called the empty bottle an “official blank”. Meaning, one in nine customers would have to insert two nickels in order to get a bottle of Coke. This in effect raised the price to 5.625. However, Coca-Cola did not implement this strategy on a national scale.
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Conclusion on How to Increase Prices
This story may appear to be ancient history but it raises some interesting questions regarding the company’s ability to grow market share with a penetration pricing strategy It is clear that Coke became the most recognised brand in the western world whilst tied to this static pricing model. Despite having a fixed price for so many years, Coca-Cola was still able to make a profit.
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