Price increase guide: plan and communicate changes

Published Monday 30 March 2026

Table of contents

• Risk of not increasing prices
• Why businesses increase prices
• How to plan a price increase
• How to communicate a price increase
• How to measure results after a price increase
• How to handle customer complaints about price increases
• Alternatives to increasing prices
• Track pricing decisions with Xero
• FAQs on increasing prices

Key takeaways

• Research your pricing position thoroughly before making changes by reviewing past price adjustments, calculating current margins, surveying customer loyalty, and benchmarking competitor pricing to make confident decisions.
• Provide customers with 60 to 90 days' notice before implementing price increases, using clear communication that explains your reasoning and emphasises the value you deliver.
• Apply strategic timing for price increases by raising prices after product upgrades, during high demand periods, or when your business reaches maximum capacity to maximise customer acceptance.
• Track key metrics after price changes including customer feedback, sales volume, profitability, and retention rates to determine if adjustments are working and inform future pricing decisions.

Risk of not increasing prices

Not raising prices when costs increase can hurt your business more than a well-planned price adjustment. Here are the risks of delaying a price increase:

• Shrinking margins: costs rise without price adjustments, reducing your profitability
• Unsustainable workload: services businesses need alternative strategies when time is the product
• Larger future increases: delaying forces bigger adjustments later, which customers resist more
• Brand damage: sudden large increases feel more disruptive than gradual, smaller ones

Why businesses increase prices

Small businesses increase prices for several reasons. Understanding your motivation helps you plan the right approach.

Common reasons for increasing prices:

• Profit margin improvement: you kept prices low to attract customers, but now need higher margins to sustain the business
• Strategy repositioning: you're moving from value pricing to premium positioning, which requires higher price points
• Manufacturer price increases: your supplier has raised their recommended retail price, which often signals a shift in market value
• Supply chain cost increases: your supplier has raised the price of raw materials or delivery, and you need to maintain your profit margin
• General inflation: general inflation, rising payroll, or other business costs have increased by 10% or more in the last year, and you need to increase prices to maintain your margins
• Added features or value: you've improved your product or service in response to customer demand, making it more valuable

How to plan a price increase

Plan a price increase in four stages: research, strategy, communication, and measurement. Following this process helps you raise prices confidently while keeping customers.

1. Research your pricing position

Pricing research gives you the data to make confident decisions. Before setting a new price, gather these insights:

• Pricing history: review how past price changes affected sales and customer retention
• Current margins: calculate your profit margin and identify your target margin (an accountant can help)
• Customer loyalty: survey customers to gauge their price sensitivity and satisfaction
• Competitor pricing: check what similar businesses charge for comparable products or services

Find a bookkeeper or accountant near you.

2. Calculate the right increase

Calculate your price increase to hit your margin targets without overcharging. Use these methods:

• Cost-plus method: add your desired profit margin to your total costs per unit
• Percentage increase: apply a flat percentage (such as 5% or 10%) across all products
• Margin-based calculation: work backwards from your target profit margin to find the required price
• Competitor benchmarking: compare your prices to similar businesses and adjust accordingly

Consider whether a single increase or phased approach works better. Smaller, incremental increases are often easier for customers to accept than one large adjustment.

3. Develop your pricing strategy

Your pricing strategy determines how and where you apply the increase. Choose an approach that fits your business model:

• Raise prices silently: update price tags without formal announcements (works well for retail)
• Segment by customer type: keep existing customers at old prices while charging new customers more
• Add loyalty perks: offer rewards or discounts to retain customers after the increase
• Use promotional pricing: raise base prices but offer periodic discounts that match previous levels
• Apply annual increases: raise prices by a set percentage each year, tied to inflation
• Target specific products: increase prices on high-volume or premium items for maximum revenue impact
• Eliminate discounts: keep base prices steady but remove existing discount offers. Be aware of the risk: research shows that 48% of consumers would stop buying a brand entirely if it eliminated deals.
• Add surcharges: maintain base prices but charge extra for peak times or premium services
• Test different prices: try two price points in different markets to see which generates more revenue
• Experiment with bundles: offer product packages at a discount to test customer response before rolling out widely

4. Choose the right timing

Timing affects how customers receive your price increase. Raise prices when the perceived value is highest:

• After upgrades or recognition: customers accept higher prices more easily when you've improved your offering or won an award
• During high demand: services businesses should consider increases when bookings approach maximum capacity, as experts note you often can't achieve better than 75%–80% utilisation of an hourly worker

How to communicate a price increase

Communicate a price increase effectively to reduce customer pushback and maintain trust. Transparency and timing matter most.

1. Give adequate notice

Notify customers early so they can budget for the change. Provide 60 to 90 days' notice before the new prices take effect. Services businesses may have regulatory or ethical obligations to provide advance notice.

2. Choose your communication channels

Reach customers through multiple channels:

• Email: personalised messages to your customer list
• Signage: in-store or on-site pricing displays
• One-on-one conversations: direct conversations with key accounts

3. Craft your message

Use clear, positive language when announcing changes:

• Choose softer terms: use "adjustment" or "update" rather than "increase"
• Show both figures: provide the percentage change and the new amount
• Explain your reasons: mention rising costs, supply chain pressures, or inflation
• Highlight value: remind customers of the benefits they receive
• Reference timing: note how long it's been since your last price change

4. Contact key customers first

Reach out to your most important customers before making a general announcement. If they're concerned, explain what led to your decision.

How to measure results after a price increase

Measure results to understand whether your price increase is working or needs adjustment. Track these metrics after implementing changes:

• Customer feedback: complaints and concerns, then respond appropriately
• Customer surveys: how customers feel about the new pricing
• Sales volume: whether unit sales have dropped significantly
• Profitability: whether margins have improved as expected
• Retention rates: whether customers are staying or leaving; research shows a 5% increase in retention can increase profit by 20% to 90%

Accounting software like Xero can help you analyse these trends through up-to-date accounting reports.

How to handle customer complaints about price increases

Customers complaining about price increases is normal. How you respond determines whether you keep the relationship.

1. Listen and acknowledge concerns: Let customers express their frustration without becoming defensive.
2. Explain the reasoning clearly: Share the factors that led to your decision, such as rising costs or improved features.
3. Emphasise value delivered: Remind customers of the benefits they receive and any recent improvements.
4. Offer alternatives when appropriate: Suggest a different product tier, payment plan, or loyalty discount if available.
5. Document feedback for future decisions: Track common objections to inform your next pricing review.

Alternatives to increasing prices

Alternatives to a price increase can protect your margins when other options work better for your business. Consider these options:

• Add or raise fees: charge for shipping on orders below a certain threshold if you've offered free delivery
• Consolidate pricing tiers: simplify your pricing structure to increase average revenue per customer
• Reduce inventory costs: hold less stock if you can reorder quickly and predict demand accurately
• Negotiate supplier terms: request better pricing or payment terms as your order volumes grow
• Adjust product sizing: reduce package sizes while maintaining price (be prepared for customer feedback)

Track pricing decisions with Xero

Track your pricing decisions to understand what's working and adjust quickly. Xero gives you the tools to monitor the impact of price changes on your business.

• Monitor margins in real time: see how price adjustments affect your profitability
• Track sales trends: identify whether volume changes after a price increase
• Run financial reports: analyse revenue, costs, and margins with up-to-date data
• Make confident decisions: use accurate numbers to guide your next pricing move

Make informed pricing decisions with Xero's real-time reports and margin tracking. Get one month free

FAQs on increasing prices

Here are answers to common questions about raising your prices.

How much notice should I give customers before a price increase?

Give customers at least two to four weeks' notice for standard price changes. Services businesses with contracts may need to provide 30 to 90 days' notice depending on agreement terms.

What percentage price increase is acceptable to customers?

Most customers accept increases of 5%–10% without significant pushback, especially when you explain the reasons clearly. Larger increases may need to be implemented in phases, but data shows even a 15% price increase maintains profitability with up to a 23% loss in sales volume.

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

Both approaches work depending on your business. Keeping existing customers at their current rate builds loyalty, while a uniform increase for everyone is simpler to manage and avoids resentment if customers discover different rates.

How often can I increase prices without losing customers?

Annual increases tied to inflation or cost changes are generally accepted. More frequent increases require clear justification and strong communication.

What if my competitors don't raise their prices?

Focus on your value proposition rather than matching competitors. If your product or service delivers better results, customers will pay more. Track whether you're losing customers to competitors and adjust if needed.