Unveiling the rationale behind a price hike can be a delicate dance. It's about striking a balance between maintaining customer trust and ensuring business sustainability. Let's delve into the art of communicating price increases effectively and transparently.
Communicating a price increase to customers is never a pleasant task
It has the potential to stir customer service complaints, social media outrage, or simply lose customers altogether.
- To avoid these fiascos and to blunt customer resentment, here are three actions that managers should take
- They are backed by evidence found in academic research and my own experiences working with companies
Link the Price Increase to a Customer-Centric Value Narrative
The most effective price increase communications are customer-centric
- Emphasize that the brand has undertaken the effort to understand how its customers derive value and factored this knowledge into the pricing process
- A compelling value narrative establishes the sequence of actions for the price increase
- Customer feedback leads to identifying unmet needs, significant investment by the brand, which results in new features, and finally, the delivery of benefits customers value
Call the action a price increase, not a price adjustment, a price change, or another euphemism
Decades of consumer psychology research has consistently found that attempts to obfuscate bad news rarely pay off for brands
- Authenticity and honesty matter to customers, especially for bad news
- When a brand uses a euphemism to convey price increases, it arouses suspicion, making recipients more vigilant and critical of the information contained in the announcement
Explain the reasons for the price increase clearly
Use the third person instead of “we” to emphasize the urgency of the announcement
- Perceived fairness of the motive for the increase is the second biggest driver of how customers react
- The prospect of inflation, widespread shortages, rising input costs, and the return to normalcy after the pandemic are on everyone’s mind
