March 22, 2024

How to Write a Price Increase Letter

image of a hot air balloon with a pound sign and envelopes around it

So you’re thinking of putting your prices up, but you're not sure how to go about it.

It’s always a slightly tricky conversation to have.

You’ve probably envisaged the worst-case scenario, where, on mass, your customers turn on their heels, raise their noses and abandon your business for the cheap competitor who’s set up shop down the road.

That concern is real, but also highly unlikely.

While increasing your prices may put off some of your customers, plenty will stay with you. The trick is about providing plenty of warning and an explanation as to why you're putting your prices up.

To do this you should send a price increase letter and to make life easy for you we’ve created a couple of drafts.

What will happen if you increase your prices?

First up, let's be clear, at some point you’re going to have to put your prices up.

With rising inflation, changes in the market and the growth of your own business, price increases are inevitable.

So the real question isn’t whether you should increase your prices, but when.

Perhaps even more importantly, you need to consider how you actually go about implementing a price increase.

The good news is that more often than not if done correctly, you shouldn’t lose too many customers when your prices go up. And, even if you do lose customers, there are plenty of opportunities to take on new ones.

So what happens when your prices go up?

The first thing to understand is that losing customers is not always a bad thing.

Most of your customer base will value your service because of the quality you offer and will accept a price increase because they want to continue to use someone who they know and trust.

Furthermore, those customers you do lose are probably not worth hanging onto anyway.

If you have customers who are trying to drive a low price or get a cheap deal, these are the customers who also often cause the most problems.

If they are only interested in the price, they are less likely to see the value of more premium products.

Cheaper alternatives are more likely to break, wear and degrade and result in a less impressive finished product. This results in more unsatisfied customers, which makes them more likely to complain when there are issues.

What’s more, amongst your more loyal customers - who see the worth in high-quality products and value your expert advice - it is far easier to cross-sell and upsell a better service.

This means it’s possible to make much more from these customers than those looking for a bargain, and also means these customers receive a better service and finished product.

nad holding pen on paper showing graphs

What all this equates to is that losing the low-paying customers may actually be beneficial.

By dropping these customers, it makes room for you to take on more clients who are open to paying more for high-quality products and services.

By increasing your prices you market yourself at a higher value.

The added benefit in the current market is that the demand for tradesmen and women is very high, with demand up by 50% since 2020. This means that finding new clients to take on shouldn’t be too difficult - that is if you want them!

You may find that having reduced your output, you enjoy the extra time you’ve freed up, allowing you to spend more time with family. You may decide that you want to pursue other interests or spend more time doubling down on developing your business. There is plenty of opportunity.

The long and the short of it is that increasing your prices and even losing customers doesn’t need to be something to worry about but is actually a great opportunity.

How should you increase your prices?

Now that we’ve shown that increasing your prices isn’t so risky, the next thing to consider is how best to announce these changes.

It’s time to consider some of the dos and don’ts of price increases.

1. Give some warning.

An easy mistake to make is not giving your customers enough warning before you implement a price change.

If you’re going to increase the price, your customers need time to take it on board and decide whether they’re going to stick with you. If you blindside them with a sudden increase they’re more likely to respond negatively.

By providing ample warning your customers have time to readjust their expectations before the increase.

2. Provide a genuine explanation

Sometimes when you’re operating as a business it can be easy to overcomplicate things.

When communicating with your customers you might feel like you need to tiptoe around the topic of price or avoid addressing the issue straight on. However, the best thing you can do is give a straightforward genuine answer.

If your costs have gone up and you need to charge more, just tell your customers.

Explain where your expenses have increased and how important it is for you to be able to provide a quality service. Reaffirm the value of your service and explain how increases in price are necessary to prevent corner-cutting.

The last thing your customers want is for you to compromise on the quality that you offer them. Make it clear that higher prices ensure that you can operate at the standard they expect.

The best way to do this is to send out a price increase letter or email that outlines what the new prices are based on.

We have provided some example price increase letters you can use below.

3. Plan ahead

Sometimes circumstances might make a significant price increase unavoidable. But where it’s possible to minimise a drastic price change it’s better to keep the increase relatively small.

If you make sure you plan ahead and provide your customers with ample warning, it’s easier to control your prices.

Rather than leaving your prices for a long time, keep track of your costs and save yourself from having to increase your price by a big margin on multiple occasions. By keeping on top of things you only need to make small increases at the right time.

To make life easy for you consider investing in good CRM software.

With a solution like Payaca, you can track and manage all your expenses, materials and ongoing projects while using detailed analytics that give you a constant picture of how your business is doing and where your profit margin is. Give Payaca a go for free.

Whatever you decide, if you explain where the extra costs come in, customers are more likely to be accepting of the new figure.

4. Offer new incentives (or celebrate current ones)

Try using the s**t sandwich.

Start off by providing some positive information, for example highlighting a new product or service you offer or a discount you’re running.

Then introduce the price increase with an explanation of how this discount will ultimately benefit the customer.

bread snadwich with lettuce, tomatto, cheese and ham

Conclude with another positive whether that be a new incentive or a special deal. Perhaps you could even make a special exception for your oldest customers keeping their prices lower for an extended period.

By framing the news of the price increase in this manner, with a positive on either side, you make it far more digestible for your audience.

What about fluctuating material costs?

One issue we haven’t covered is the changing price of materials.

This might be the price of wood for a carpenter or the price of steel for construction workers, whatever the material, price variation is common, but right now the market is particularly changeable.

grpahic of a man pushing boxes ona trolley

So how should tradesmen and women approach this issue and what can be done to mitigate the problem of ever-shifting material prices?

For a more detailed look at this issue, read our blog on managing material prices.

Managing material price increases

Our key advice when considering material costs in your pricing is the same as with all your prices. Keep your customers informed and don’t be afraid to adjust.

We recommend using good quoting software that can help you manage your material prices and create quotes that always reflect the correct margins and markup.

By using software like this, you don’t need to worry about adjusting prices for every quote, as the software can automatically adjust this for you.

This is a great way to stay on top of your prices and make sure your costs are always covered when communicating with your customers.

Writing a price increase letter

When writing a price increase letter it’s important to make sure you are clear about what changes are occurring.

This means providing the customer with all the information, not just how much prices will increase, but who this applies to, when it is going to occur and how it will affect current projects.

Try to put yourself in the shoes of the customer and consider what information you would want to know and how you’d like it to be delivered.

Remember the biggest risk you have of losing customers is if they are confused. As long as you lay out the terms clearly, you should be okay.

Price increase letter templates

Template 1

Subject Line:* Important Update: Adjusting Our Pricing to Serve You Better

Dear [Customer's Name],

At [Your Company Name], we are continually striving to provide our clients with the highest quality service and the most advanced solutions in [your industry].

Our commitment to excellence has always been our guiding principle, and it is with this commitment in mind that we find ourselves needing to make some adjustments to our pricing.

Effective [Date], our prices for [specific service or product] will be adjusted by [percentage or amount].

This decision was not made lightly; it reflects the rising costs of materials and equipment, and the need to adhere to the latest industry standards and regulations, ensuring we can continue to offer you the unparalleled service you've come to expect from us.

We understand that any change in pricing can impact your budgeting and planning. Therefore, we are more than willing to discuss this adjustment with you directly, answer any questions you may have, and work together to continue our partnership smoothly.

Please feel free to reach out to me personally at [Your Contact Information].

Thank you for your understanding and continued trust in [Your Company Name]. We look forward to serving you with even greater quality and efficiency in the future.

Warm regards,

[Your Name]

[Your Position]

[Your Company Name]

[Your Contact Information]

Template 2

Subject Line:* A Note of Thanks and Some Upcoming Changes

Dear [Customer's Name],

First and foremost, I want to say thank you for your ongoing support and trust in [Your Company Name].

It's been our pleasure to serve your [service you provide] needs, and we're proud to have played a role in ensuring the comfort and efficiency of your home/business.

As we navigate through the ever-evolving landscape of the [your industry] industry, we are faced with the challenge of adapting to the rising costs of materials, the introduction of new technologies, and the need to comply with updated industry standards.

These changes are essential for us to continue providing you with the high-quality service and innovative solutions you deserve.

With this in mind, we will be implementing a modest price increase for our services, effective [Date]. This adjustment is necessary for us to maintain our standards of quality and service in the face of increased operational costs.

We are committed to transparency and are here to discuss any concerns or questions you might have regarding this update.

Thank you for your support and understanding. We look forward to continuing to serve you with dedication and excellence.

Best wishes,

[Your Name]

[Your Position]

[Your Company Name]

[Your Contact Information]

Template 3

Subject Line:* Update on Our Pricing Structure

Dear [Customer's Name],

I hope you're doing well.

We value the trust you place in [Your Company Name] for your [service you provide] needs. I'm writing to inform you of an upcoming adjustment to our pricing, effective [Date], due to the rising costs of materials and the need to comply with the latest industry standards.

We're committed to maintaining the quality and reliability of our services, and this price adjustment is necessary to continue delivering the excellence you expect from us. The new prices will affect [specific service/product], with an increase of [percentage/amount].

We understand the importance of planning and budgeting, and we're here to discuss any concerns you may have. Please feel free to contact me directly at [Your Contact Information].

Thank you for your understanding and continued support. We look forward to serving you with the same dedication and quality as always.

Best regards,

[Your Name]

[Your Position]

[Your Company Name]

[Your Contact Information]

Template 5

Subject Line:* Exciting Updates & Important Pricing Information from [Your Company Name]

Dear [Customer's Name],

We're happy to share that [Your Company Name] has recently upgraded our [equipment/technology/services] to bring you even more reliable and efficient [your industry] solutions. Our commitment to providing you with the best possible service is stronger than ever.

As we continue to invest in the quality of our work and adhere to the latest industry standards, we find it necessary to adjust our pricing structure to reflect these enhancements.

Therefore, starting [Date], our prices for [specific service/product] will see a modest increase of [percentage/amount]. This adjustment ensures we can keep delivering the high-standard services you've come to expect from us.

To show our appreciation for your continued support, we're excited to offer you an exclusive [discount/special service] on your next purchase or service call. This is our way of saying thank you and ensuring you receive the best value for your investment in [Your Company Name].

We understand that changes in pricing require adjustment, and we're here to discuss any concerns you might have. Please feel free to reach out to me directly at [Your Contact Information].

Thank you for your understanding and loyalty. We're excited to continue serving you with even greater efficiency and quality.

Warmest regards,

[Your Name]

[Your Position]

[Your Company Name]

[Your Contact Information]

Final thoughts

Dealing with pricing and communicating increases in your prices to your customers can be an uncomfortable thing to do. You might worry about upsetting your customers and damaging your business. The important thing to remember is that the benefits outweigh the risks.

Increasing your prices is an inevitable part of the development of your business. Your customers will expect it to happen at some point and as long as you are transparent and sensible in the way you go about it, your service business will benefit and your customer patronage will not suffer.