Telling buyers about a price increase can be worrying for artists and makers. What will your customers say? What if it scares them away? What if they get angry?
Well, let’s talk about it.
Buyers react to a price increase in four ways:
1. They leave you.
2. They ask if they can keep paying your old prices.
3. They say “Well, it had to happen sooner or later.”
4. They flame you on social media and post a dead bat through your letterbox.
How to handle the dead bad reaction.
Let’s work backwards because the dead bat reaction is generally the one that frightens creative people the most. It’s the possibility that a customer will respond to a price increase with a furiously indignant tirade on the theme of “Who the hell do you think you are?”
Just the thought of a buyer turning on you like that is very intimidating. But here’s the thing.
That kind of reaction is rare.
When you go to the supermarket and you notice (if you happen to notice at all) that the price of chocolate milk has gone up, do you go spare in the dairy aisle? Do you drop-kick a melon? Do you scream for the store manager?
Of course you don’t. And have you ever seen anyone else doing that? We may not be particularly happy about having to pay more for our Yopp, but most people accept that price rises are just part of life.
In the echo-chamber of the internet, it can seem like extreme reactions to minor bumps in the road are common. They’re not.
And if you ever did get an aggressively unhinged response from a customer, well, that’s when you hit delete or put down the phone. It’s your business and you can run it any way you want. You can raise your prices. You can redesign your logo. You can go to work in a flamingo costume if you want.
You’re in charge.
How to handle the “sooner or later” reaction.
Now let’s move on to the most common way buyers react to a price increase – when they say “It’s about time,” or “I guess it had to happen sooner or later.”
This response is the verbal equivalent of a shrug, and it can come in a few different flavours. There’s wistful acceptance – the sense that you were always going to wise up and raise your prices at some point, but it was one hell of a gravy train while it lasted.
There’s world-weary resignation, which yearns for the days when you could order a full English breakfast, a black coffee and a packet of Woodbines and still get change back from the shilling.
You might even find that some customers say “Well, of course your prices are going up. I’ve been saying they’re too low for years.” In which case you should probably nod solemnly, agree that their grasp of economic theory is vast and deep, then ask if they’d like to try some pieces from your new collection.
The point here is that, in principle, most buyers accept price rises as a fact of life and therefore their reaction is more or less neutral – to the point where they may not say anything much at all. Sure, they’re not throwing a party, but they’re also not throwing darts at your forehead.
This doesn’t give you permission to yank their chain, however.
If you raise prices too far or too fast, or if the quality of your product and service don’t keep up with what you charge, even this group of customers will get cheesed off.
How to handle buyers who want special treatment.
You’re most likely to get this from two directions – long-established, deeply loyal customers who’ve been buying your stuff for years, and brand new customers who’ve only just found you.
Depending on the situation and your buyer’s personality, they might drop a veiled hint that they’d like to keep paying your old prices or they might ask you straight out.
It’s clear to see why long-established buyers might ask for special treatment. They saw the value in what you offer from the start, and without their support you probably wouldn’t be where you are today.
By excluding them from a price rise, you’re acknowledging their investment in you and throwing a little sugar their way. That can strengthen your relationship even further.
Brand new customers have a different problem. They may be only recently in the door, but they like what they’ve bought from you so far and are keen to try more.
A price rise during that early testing phase is rather like receiving a marriage proposal on a second date. Even if the signs are promising, you probably haven’t gathered enough data to feel good about making a bigger commitment.
Now, as we just talked about, you’re in charge of your business. If buyers ask for special treatment, only you can decide whether to grant it. That doesn’t have to cause you sleepless nights, though. Here are a few things to bear in mind.
First, let your existing wholesale customers know that a price increase is coming.
(There’s a script for that here.)
That way they have time to get used to the idea and plan accordingly. This can also lead to a nice bump in sales for you. After all, if prices are going up soon, it makes sense to grab one last order at the lower price today.
Beyond that, again on the wholesale side of things, you can decide how to implement your price rise on a case by case basis. You might choose, for example, to allow a handful of your long-established stockists to stay one price increase behind everyone else.
If you revise your prices annually, as many suppliers do, this can make your most loyal retailers feel pretty special. Although prices are still going up, they’re still getting your best rate. Of course, they still have to order enough stuff, regularly enough, to make it worth your while.
If new stores are worried about a price rise, you can finesse that too.
You can say “Okay, I understand your customers are still finding their feet with my work, so here’s what I’ll do. You can keep the old price for [X weeks / one more order / till the end of the season.] If you’re happy to carry on after that, I’ll switch you over to my regular wholesale price.”
You can’t say much fairer than that.
The important thing with this type of buyer reaction is to be prepared and know what you are (and aren’t) willing to offer. If you’re not expecting it, customers asking for special treatment can leave you flustered. Building in time to think about it in advance allows you handle it gracefully, and perhaps even turn your buyers into bigger fans than they are now.
How to handle buyers leaving you.
Alright. Now let’s talk about the fourth way buyers react to a price increase. That’s when they just get up and leave.
It may not seem like it, but this is actually a good thing.
I SAID IT’S A GOOD THING.
I knew this might happen and I brought a paper bag. Look, I drew a happy face on it.
Let me just empty out the crumbs. That’s some impressive hyperventilating and we don’t want you inhaling a bit of Coronation Chicken.
That’s it. Breathe into Mr Sandwich Bag. I’ll rub your back and recite The Velveteen Rabbit until you’re feeling better.
“What is REAL?” asked the Rabbit one day, when they were lying by the nursery fender…
Oh, you’re back. Here’s why some buyers leaving you isn’t the end of the world.
Contrary to what you may have heard, it’s very difficult to build a profitable business on customers who are highly sensitive to price. Maybe you’re thinking, “Well, Aldi seems to be doing alright,” or “IKEA isn’t exactly short of a dime.”
If so, you need to understand that successful low-price, high-profit companies actually aren’t that common. Household names like these are few and far between, unlike the charred remains of their failed competitors.
But before we go any further…
What’s price sensitivity?
It’s a way of describing the degree to which price affects the sales of a product or service.
Some buyers are highly sensitive to price. They can only tolerate a tiny increase before it triggers a change in their behaviour.
If they’re used to buying your birthday cards at $4 each and then you put the price up to $4.25, they’ll jump ship to one of your competitors. Price is the most important factor in their buying decision.
Some customers, on the other hand, are much less sensitive and will tolerate even big price rises without batting an eyelid.
They know they’re not paying the lowest possible price, but the quality, service and value you provide still makes them feel good about choosing you. They think you’re worth it.
Now, customers who shop on price are not loyal.
If paying the minimum amount is what matters to you – more than quality or service, for example – you go where the wind takes you. Even if you’ve been buying your fish fingers from one supermarket for years, all a rival has to do is offer a lower price and you’ll buy from there instead.
This is a dicey foundation for any business.
If your customers will only pay the absolute minimum for your product, generating enough cash to cover even your basic costs can be incredibly challenging. The companies who manage to pull it off do so by sticking to a very particular set of principles.
They’re incredibly efficient. Their core product range can generally be described as “no-frills.” They’re continually looking to expand so they can exploit the economies of scale. They drive a forceful bargain with their own suppliers. Low prices have been the core of their strategy from the day they opened their doors.
In most markets, there are usually only a few low-cost, high-profit companies who are thriving.
They’re like deep sea creatures who live at the very bottom of the Mariana Trench. They only survive because they’re specially adapted to handle extreme pressure.
Now, does that sound like your business?
Like, at all?
Is your company an eyeless monster drifting silently through the depths? Are its fangs so big it can’t close its mouth? Does it make fishermen cross themselves and small children scream?
If you make a handmade product, probably not.
Your type of business simply isn’t designed to meet the demands of highly price sensitive customers. You can’t compete on price with mainstream manufacturers who churn out hundreds of products an hour. You don’t have the buying power to vastly drive down the cost of your raw materials, and you don’t have the streamlined efficiency of a gulper eel.
In short, you belong in much warmer, richer waters.
This is one reason why it’s okay if some customers leave you when you raise your prices.
If they’re that sensitive to price, they weren’t going to stick with you for long anyway – certainly not long enough for your business to mature and thrive.
Here’s another reason.
Buyers come to you because they’re looking to solve a problem.
They need a giftable organic skincare range on their shelves before Mother’s Day, or they need a necklace to wear to a job interview.
Whatever that problem is, price-sensitive customers want to solve it in the cheapest way possible.
They want a result, but at a cost that doesn’t hurt or inconvenience them. That puts a lot of extra pressure on you because you’re working to a very tight brief. Whatever you offer them has to simultaneously tick a lot of boxes.
Retailers and customers who aren’t price sensitive are also looking for an answer to their problem. The difference is that they care more about solving it than they do about holding on to their money. They want the best solution for their particular situation – that’s the only box that must be ticked – and they already accept that it may not be the cheapest.
If fixing their problem means making a commitment to you and your work, well, they’re happy to consider it. They see you as an investment.
Which kind of buyer would you rather have?
The final reason not to freak out about customers leaving you is that it’s actually happening all the time.
Every day, old customers fall away and new ones find you. Even if you never changed your prices ever again, over time some people would still drift off. There’s no way to hold on to them all, no matter what you do.
So let them go. Part company cheerfully and swim upwards into the light.
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