Streaming services, software packages, television, Internet and telephone; modern life is full of monthly expenses. While the subscription model may be commonplace, it is a source of continued frustration for consumers. The primary frustration is the near-annual price increases.
Over the past few months, a slew of both B2B and B2C companies have announced price increases, angering their customers. That hostility is understandable – we’re still not beyond the global pandemic that has hurt business income, as well as caused job losses and other financial difficulties for consumers. Inflating expenses at a time like this can seem callous and even greedy.
However, sometimes price increases cannot be avoided. Business is inter-connected; a price increase at one business means that another company has to increase its prices. We are all subject to inflation, market deviations, and other external factors that result in a need to pass costs on to the consumer from time to time.
Business often fails to communicate these issues effectively. Some companies put their prices up without explanation. In the past few months, tools that I use for my business have increased their monthly subscription fees by double with nary a word of explanation. As you can imagine, my immediate response to this is to search for alternatives. This practice does nothing to engender loyalty.
Other companies offer vague, or even irrelevant, promises regarding the investments they’re making in their service. Entertainment companies such as Pay-TV providers or streaming services are the biggest utilisers of such an excuse, but far from the only ones. The main problem with vague notions of “investment” is that customers are not interested in the theoretical. If they can’t see it, then it might as well not exist. Worse is when the investment is in something that they haven’t asked for. Few customers are impressed when a company that does one thing decides to put up prices to do another.
Of course, all business wants to achieve the best it can, and often expansion or growing the products or services on offer is the best way of doing that.
However, to truly lessen the impact of a price hike, I’d like to suggest a few measures that most businesses should be able to achieve.
- Be honest about your reasons. Don’t throw out vague promises of improved services. If you’re raising prices because your own costs have increased, then be up-front about that.
- If you are genuinely increasing prices to improve your service, then answer the question every customer will have – “How does this benefit me?”
- Give fair warning of price increases. Too often, consumers are given 45 days or less notice that their price is increasing. It shouldn’t be too difficult to provide them with a few months, and that also gives your customer service teams more time to field the complaints.
- Reward your existing customers with bonuses for loyalty by keeping their current rate for a little bit longer. It costs much less to retain an existing customer than find a new one. Consumers have grown wise to all the best deals being reserved for new customers. Shower your existing ones with a bit of love from time to time.
- Try not to make it a “mark it on the calendar” annual event. Too many businesses announce their price increases around the same time every single year. The credibility of your reasoning for increasing prices plummets once customers notice the pattern.
- Don’t just increase prices because your competitors are. It doesn’t escape people’s attention when one company in a market puts the price up it begins a snowball effect among competitors. If you can afford to stay at the less expensive end for a while, you might even win some business from those seeking alternatives.
- Be prepared to have difficult conversations and equip your Customer Service teams with the skills to handle them. Your customers aren’t in the wrong for being annoyed because their bills are increasing, so you should treat them with respect, courtesy, and even be prepared to offer them a different package if possible.
Above all, remember that every unhappy customer is more likely to tell others than a content customer is likely to sing your praises. You can’t avoid putting prices up, but you can show empathy to your existing customers and be open and honest about the reason you need to do this.