How to Increase Prices Without Losing Customers

Rieva Lesonsky
Mon, 24 Feb 2025 13:30:00 +0000
Amazon, How-to-raise-prices, Price-increase, Pricing, Pricing-merchandising, Raising-prices, Target-market, Existing-customers, Customer-satisfaction, Customer-experience, Customer-retention, Pricing-strategy

Amazon made news when the e-commerce giant announced plans to raise the price of its annual Prime membership to $119, up from $99 at the time (it has since been raised to $139). A $20 annual increase works out to less than $2 a month, which certainly isn’t much, especially when you consider that it entitles members to free two-day shipping and streaming access to lots of TV shows, movies, music, and even sports. Still, the internet was filled with outrage and complaints from angry Prime members (and non-members).

That kind of backlash is enough to scare a small business away from raising prices—even though that's something that you may be considering. The rising costs of labor, energy, and borrowing have forced many small business owners to cut corners in order to make ends meet.

But you don't have to go on that way. Here are five tactics for raising your prices:

1. Be honest

Many consumers and businesses alike are willing to pay more for services they deem worth the cost. For example, clothing retailer Everlane has found success among millennial consumers by promoting its commitment to using ethical factories and sustainable fabrics. As a result of this transparency about what goes into its pricing, Everlane is able to charge more for its clothing than "fast fashion" retailers do.

Are you raising prices on your auto shop’s services, but hoping customers won't notice? They will—and they'll likely be more accepting of the change if you let them know that the price increase is intended to give your employees higher wages and a better standard of living.

2. Increase prices gradually

An easy way to raise your prices without alienating longtime customers is to increase prices for new customers only. However, that runs the risk of alienating new customers once they find out about the price differential. Instead, take a cue from Amazon, which gave existing Prime members a couple months to renew their memberships at the $99 annual rate. After that, they paid $119 just like everyone else. (Your long-term goal should be to get all customers paying the higher price.)

3. Time it right

Have you recently had a wave of customer complaints, a bad online review that got lots of attention, or some type of negative publicity? The time to raise prices is not when you've just had to recall your product, but when the majority of your customers are highly satisfied. Surveying customers prior to your price increase can help you confirm that what you offer is of value to them and that you’re doing a good job. If you find that a substantial proportion of your customers are dissatisfied, you need to remedy that before you start charging more.

4. Boost prices through add-ons

Have you ever purchased a piece of electronic equipment and been urged to buy an extended warranty or service contract, batteries, or some accessory along with it? Small amounts can quickly add up if you have add-on products or services that appeal to your target market. The current craze for customizing purchases makes add-ons an easier sell than ever.

For example, I've noticed more and more restaurants offering "extras" like avocado on a sandwich or chicken on a salad—for an extra fee. If you have a $10.95 chicken Caesar salad on the menu, why not replace it with a $9.95 Caesar salad and the option to add chicken for $2, shrimp for $3, or salmon for $4? Now you're charging $11.95 for the same salad, and maybe even $12.95 or $13.95, depending on the customers' choice.

Another option: Keep the price of your core services or products the same and increase the price of your add-ons. Instead of raising the price of your entrées, raise the price of your beverages, which few customers will notice.

5. Eliminate unprofitable products, services, or customers

This isn't technically a way to raise prices, but it can have the same effect. Pay attention to your financials, and track which products and services have the lowest profit margins. Unless they’re loss leaders that get customers in the door (where they then buy high-margin items too), eliminating these low-margin offerings can make you more productive and profitable by giving you more time to focus on the high-margin parts of your business.

Do you have a customer who’s paying less than you'd like, but demanding more of your time and effort? This can often occur with service businesses that land their first customers by lowballing their prices. As your business grows, however, these high-effort, low-return customers drain your energy without contributing much to your bank account. See if you can raise the customer’s prices—but if they don't agree, be willing to cut them loose.