Price increase guide: raise prices and keep customers

Published Thursday 5 March 2026

Table of contents

• Reasons for increasing prices
• Risks of not increasing prices
• How to implement a price increase
• Test your pricing strategy
• Alternatives to increasing prices
• Make price increases work for your business
• FAQs on increasing prices

Key takeaways

• Research your pricing landscape thoroughly before making changes by reviewing your pricing history, understanding your profit margins, checking competitor pricing, and assessing customer loyalty levels to set the right price point.
• Implement small, regular price increases rather than large sudden jumps, as customers handle incremental adjustments much better and this approach protects your brand reputation while maintaining customer retention.
• Communicate price changes transparently by giving customers 30-60 days notice, using gentle language like "adjustment" instead of "increase," explaining your reasoning with specific factors like rising costs, and highlighting the value you provide.
• Monitor key results after implementing price increases by tracking sales volume, profitability, customer feedback, and retention rates to understand whether your strategy is working and when to adjust your approach.

Reasons for increasing prices

Here are the main reasons businesses raise their prices and why it's a normal part of operations.

A price increase is an upward adjustment to what you charge customers for your products or services. Raising prices helps maintain profitability when costs rise, supports business growth, and reflects the true value you deliver. While the idea may feel uncomfortable, strategic price increases are a normal part of running a sustainable business. In fact, the average size of price increases rose from 8% to nearly 11% during the peak inflation period of mid-2022.

Common reasons for increasing prices include:

• Improvingprofit margins: you kept prices low initially to attract customers, but now need healthier margins to sustain the business
• Repositioning your brand: you're shifting from value provider to premium, which requires pricing that matches what customers expect
• Responding to RRP changes: the manufacturer has raised the recommended retail price (RRP), signalling increased market value
• Covering higher supply costs: your supplier has increased raw material or delivery prices
• Keeping pace with inflation: rising payroll, rent, or operational costs require price adjustments to maintain margins, especially as Bank of Canada data shows inflation surged above 8% in 2022, its highest level since the 1980s.
• Reflecting added value: you've introduced new features or improved your service in response to customer demand

Risks of not increasing prices

Understanding the risks helps you make informed pricing decisions.

Not raising prices when costs increase puts your profitability at risk. At minimum, your margins shrink. When margins shrink, you must either cut costs or sell significantly more to stay profitable.

For service businesses, selling more often isn't viable. Your "product" is your time, and that's already in short supply.

Delaying price increases creates another problem: you may eventually need to adjust prices more significantly. Significant price jumps threaten your brand reputation and customer retention. Customers handle smaller, incremental increases far better than sudden large ones. Recent economic data shows that the higher frequency of price increases was a primary driver of recent inflation. This suggests many businesses are adopting this incremental approach.

How to implement a price increase

A well-planned approach helps you raise prices while keeping customers happy.

Implementing a price increase requires a structured approach to minimize customer loss and protect profitability. Follow these five steps: research your market, develop your strategy, choose the right timing, communicate clearly, and measure results.

1. Research your pricing landscape

Research your pricing landscape before making any changes. Understanding your market position, costs, and what customers expect helps you set the right price point.

Start by reviewing your pricing history to see how past changes affected sales and retention. Know your current profit margin and the margin you need. An accountant can help with this analysis.

Find a bookkeeper or accountant near you.

Research should also cover:

• Gauge customer insights: assess loyalty levels and resistance to price changes
• Understand demand patterns: see how price-sensitive your market is
• Check competitor pricing: see what similar businesses charge for comparable products or services

2. Develop your pricing strategy

Your pricing strategy determines how, when, and to whom you apply the increase. Choose an approach that fits your business model and customer relationships.

Consider these proven strategies:

• Raise prices quietly: update price tags without formally announcing the change (works well for retail)
• Segment by customer type: keep founding customers at the old rate while charging new customers more
• Add loyalty perks: offer rewards or discounts to offset the increase (for example, 10% off a third purchase in the same month)
• Maintain prices with periodic deals: raise list prices but offer occasional promotions that bring costs back to previous levels
• Apply annual percentage increases: regularly adjust prices to match inflation or cost-of-living changes
• Target specific products: raise prices only on premium or high-volume items where small increases generate significant revenue
• Eliminate discounts: keep base prices the same but stop offering discounts to existing customers
• Add surcharges: maintain base pricing but charge extra for peak times or premium services

3. Choose the right timing

The right timing can make your price increase easier for customers to accept. While optimal timing varies by business, certain moments create natural opportunities.

Consider raising prices:

• After product or service improvements: customers are more willing to pay more when they see added value
• Following recognition or awards: external validation reinforces your worth
• When demand is high: for service businesses, consider increases when you're booked 75%–80% of the time

4. Communicate the increase to customers

Communicating transparently builds trust and helps customers accept price changes. Give plenty of notice so they can budget accordingly. Some industries have regulations requiring advance notification.

When announcing the increase:

• Use gentle language: frame it as an "adjustment" or "update" rather than an "increase"
• Be specific: provide both the percentage and the actual dollar amount
• Use multiple channels: communicate through signs, emails, and direct conversations
• Prioritize key customers: contact your most important clients personally before any general announcement
• Explain your reasoning: mention rising supply costs, labour expenses, or inflation if applicable. Analysis from the Bank of Canada shows that in the retail food sector, prices have moved in lockstep with costs, meaning the pass-through of expenses to consumer prices was complete.
• Highlight your value: remind customers of the benefits they receive and any recent improvements
• Reference your history: if you haven't raised prices in years, mention that

If customers express frustration, listen carefully and walk them through what led to your decision.

5. Measure the results and adjust

Measuring results helps you understand whether your price increase is working and when to adjust course.

Track these key indicators:

• Sales volume: watch for significant drops that might signal customer resistance
• Profitability: confirm margins are improving as expected
• Customer feedback: listen to comments and consider sending a brief survey
• Retention rates: monitor whether customers are staying or leaving

If sales or profitability fall unexpectedly, analyze the situation and consider adjusting your approach. Accounting software, like Xero, can help you analyze results through up-to-date accounting reports.

Test your pricing strategy

Testing your pricing before a full rollout helps you find the optimal price point and minimize risk. If you have time, experiment with different approaches in limited markets.

Try these testing methods:

• A/B pricing: offer two different prices to separate customer segments and compare revenue results
• Bundle testing: package products together at a discount in one market to gauge how customers respond
• Geographic testing: trial new prices in specific regions before rolling out broadly

A mobile phone retailer might offer a phone, case, and screen protector bundle at a discount in one market to test whether bundled pricing increases overall revenue.

Alternatives to increasing prices

Alternatives to raising prices can help you improve margins without changing your headline rates. Consider these options when a direct price increase isn't right for your business:

• Introduce or increase fees: charge for shipping on orders below a certain threshold if you've offered it free
• Consolidate pricing tiers: remove lower tiers or merge options to simplify and increase average revenue
• Reduce inventory costs: hold less stock if you can predict demand accurately or restock quickly
• Negotiate supplier terms: use increased order volumes to secure better pricing or terms for when you pay
• Adjust product sizing: reduce package size while maintaining price (note: customers may respond negatively to this "shrinkflation" approach, so communicate changes transparently)

Make price increases work for your business

Price increases are a normal part of running a sustainable business. When you research thoroughly, plan strategically, and communicate transparently, you can adjust your prices while keeping customers loyal.

The key is being proactive. Adjusting prices in small, regular increments is easier for customers to accept than making large, sudden increases. With the right tools to track your pricing impact, you can decide confidently.

Managing your business finances should be straightforward. Xero's accounting software helps you track pricing changes, monitor their impact through real-time reports, and decide confidently about your business strategy. Get one month free.

FAQs on increasing prices

Here are answers to common questions about implementing price increases and what customers expect.

How much notice should I give customers before increasing prices?

Give customers 30–60 days' notice for significant increases. This allows time to budget and shows respect for the relationship. Service businesses with contracts should review their terms, as some may require longer notice periods.

What's the best way to handle customer complaints about price increases?

Listen first, then clearly explain why you made the change. Share specific factors driving why you increased prices, such as rising supply costs or added features. For key customers, consider offering a period to transition or a loyalty discount.

Should I increase prices for existing customers or just new ones?

Most successful businesses apply increases to all customers. However, they may keep long-term clients at current rates or offer loyalty perks. Raising prices only for new customers works short-term but creates pricing inequity over time.

How often should I review my pricing?

Review your pricing at least annually, even if you don't change anything. While inflation in Canada was stable at close to 2% per year for nearly a quarter-century, the recent volatility following the COVID-19 pandemic means you should review regularly.

What if my competitors don't raise their prices?

Base your pricing on your own costs and value, not just competitor pricing. If your costs have increased or you offer superior value, your pricing should reflect that. Customers who value quality over price tend to be better long-term clients.