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How to Raise Your Prices or Rates without Losing Customers

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How to Raise Your Prices or Rates without Losing Customers

By Caron_Beesley, Contributor
Published: October 31, 2011 Updated: May 21, 2012

Everyone has to increase their prices eventually. If you’re fortunate your customers won’t notice. But in a budget conscious economy, the chances are they will.

If you run a contract- or consulting-based business, it can be doubly difficult to raise your rates because you’re going to have to be upfront about the changes, and in all likelihood negotiate a new contract.

So it all makes for a worrisome situation. However, done right, raising your prices should not alienate your customers – particularly if they value you and your services. Here are some tips for raising your prices without losing customers.

1. Have a Pricing Strategy

A pricing strategy is a well-thought out plan that helps you calculate the prices, rates, or fees associated with your products or services. This may be reviewed monthly, quarterly, or annually depending on market forces, wholesale prices, and other “cost-of-doing-business” expenses. This way you can make rate increases a regular part of your business instead of waiting until it’s too late.

2. Change Your Pricing Structure

Changing how you package and price your product or service is a very common way of making more money from customers without a rate hike and without ruffling feathers. Here are some ways to do this:

  • Cross-sell Your Services – “Would you like fries with that?” Cross-selling is an easy way to increase sales of related services and meet your customer’s needs. For example, a spa business could tag on a range of manicure services to its menu of massage services at a packaged price.
  • Tier Your Pricing – Offering multiple price points across your business is a great way to up-sell products and services without raising prices. The plan here is that the tempted consumer will opt for the higher end of the tier. For example, a coffee shop may offer the following options:

1. Cappuccino @ $1.50

2. Cappuccino with a Shot of Syrup @ $2.50

3. Cappuccino with a Shot of Syrup and Cream @ $3.50

The variations are tempting, the value is clearly advertised and the decision to spend more is ultimately in the hands of your customer. The same basic, middle, and premium tiers can also be used in among consulting businesses.

  • Change How You Bill Your Time – If you are a consultant or provide any service that involves selling your time in blocks, think about switching how you package your time. Trying to increase your hourly rate can be tough, instead sell your time in different chunks at different rates:

·  2 hours @ $85 per hour

·  5 hours @ $75 per hour

· 10 hours @ $65 per hour

3. What about Consultants or Service-Based Businesses?

If you operate a service-based business or are a freelancer/consultant, consider putting a stake in the ground and raise your rates after you’ve reached a certain client threshold. Options include raising your rates each year for new customers or after every 5 or 10 new customers, depending on how many clients you have on the books.  

In the case of existing customers, approach your client directly and expect to negotiate your rate hike. If you are 100% confident in the value of your services then it’s likely that your clients are too and are fully expecting this.  Provide a heads up – if you plan on raising your rates in the new year, engage the client in November – this gives them enough time to review your proposed rate, negotiate, and plan accordingly.

4. What if a Customer Balks at the Price Hike?

Everyone has a reason and a right to raise their prices. But be prepared for some push-back and get ready to explain your increase. Explain your price hike in terms of the added value you bring and highlight any investments you have made in yourself (such as training) or your business that justifies the investment.

Above all, expect to negotiate and use your pricing strategy to plan for this. Don’t go in too high to start with, because an educated client will almost certainly reject your opening rate without discussion. Likewise, ask yourself how low are you willing to go? What is the ideal mid-point at which you’d be happy to accept a negotiated rate?

What Price Raising Strategies Have Worked For You? Please Leave a Comment Below.

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About the Author:

Caron Beesley


Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley


Thanks for giving this information. Actually we are selling women dresses with the name of The Trendy Style dress shop. And we were confuse how to raise the prices. Thanks again! This post was edited to remove a link. Please review our Community Best Practices for more information about how best to participate in our online discussions. Thank you.
There is no chance you can save your clients when raising the prices. People always look for cheaper prices for the same product, and that's really easy to do with the help of the Internet.
Absolutely agree with JohnTrevor. Nowadays we have a global economical crisis, people won't agree to start paying more for the same product. If you need to increase the price, you should change the product or find other market to sell your product there.
Nope that ain't gonna work. People don't like price increase. The only way to increase the price and not to loose all the customers is to make a full recustomization of your product.
It proved to be Very helpful to me and I am sure to all the commenters here! Its always nice when you can not only be informed, but also entertained! Im sure you had fun writing this article.
Another suggestion is to always look to raise prices in line with COLA each year, just so you stay ahead of the curve.
Great post! I was wondering from where or from who can I get permission to reprint this article on the Veterans Business Update newsletter for the UTPA Veterans Business Outreach Center? If you can please guide me in the right direction, that would be great. Please feel free to contact me at vgarciaz25@utpa.edu or (956) 665-7554 and ask for Victoria.
I believe there are very few instances where government entities have any copyright rights. http://www.usa.gov/copyright.shtml

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