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How to Implement a Price Increase

Andrew Rudin | Dec 12, 2016 164 views 4 Comments

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This month, I had a remarkably cruddy customer experience. “So what?” you say. “That’s not unusual.” Agreed. But this foul was so grievous, I worried whether another company might repeat the gaffe.

As a professional marketer – as a compassionate human being – I feel duty bound to intercede. If your company is about to wander into the same bad spot, please . . . don’t! Take a deep breath. Get some fresh air. Walk around the block. Pause by reciting the alphabet backwards.

What was the gaffe? A price increase! Well, not the price increase itself, but how it was done. If you want to learn how one company raised prices, and committed a pile of customer missteps along the way, read on . . .



Just after Thanksgiving, I went to Lifetime Fitness for a session with my trainer. I will call him Jim. “Bad news,” Jim said the moment he greeted me. “We have a price increase effective immediately. Personal training now costs another $9.00 for the hour.” “Why?” I asked. “Member education,” he replied, adding that the new rate applied to all Lifetime members, not just at my local facility.

My quarrel is not with Jim. And I’m not even fussing about the price increase, though I could. My beef is with how Lifetime handled it.

Here are tips for a gentler, more effective way to request more coin from your customers:

1. Communicate the price increase in writing. Lifetime put the entire communication onus on its trainers, who mostly informed customers face-to-face, using inconsistent messages. A written explanation from Lifetime’s corporate office should have been available to members. And as of the time I wrote this, Lifetime revealed no information about the price increase on its website.

2. Provide adequate lead time for staff and customers. Lifetime’s trainers told me the corporate office announced the price increase barely one week before it was to take effect. Even worse, that was on November 22d, the Tuesday before Thanksgiving, when many people travel.

3. Give solid, unambiguous reasons for the increase. “Member education”? Clear as mud!

4. Offer a management point-of-contact – including phone number and email – to address questions and concerns. Lifetime provided none, though when I requested it, Jim gave me the email address for his immediate supervisor, who reached out to me within 48 hours.

5. Make sure the frontline staff understands and supports the price change. Based on my conversations with employees, Lifetime bellyflopped by not providing adequate communication or soliciting staff feedback.

6. Expect reactions, and plan for the risks. Concern, complaint, and churn – all of it will come. And Lifetime was unprepared.

Right now, across the USA and around the world, you can find the words price increase scrawled in Magic Marker on thousands conference room whiteboards. Unwelcome change, waiting in the wings. How will customers perceive the news?

When announcing higher prices, management has a choice: they can project clarity, consideration and care, or, in the case of Lifetime, they can demonstrate callousness, opacity, and arrogance.

Above all, a price increase presents an opening for a company to engage with its customers in ways that aren’t predestined to be negative or confrontational. “Here’s why we value your business. Here’s what you can expect from us in return. And if you’re concerned, tell us! We’re listening, and we want to hear what you think.”

That healthy opportunity blew right past the senior management at Lifetime.

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4 Responses to How to Implement a Price Increase

  1. Gautam Mahajan December 13, 2016 at 5:49 am (169 comments) #

    Andy, who cares about the Customer has been my lament and echoed by you. I wonder how many companies will follow your advice or remain in a who cares syndrome?

  2. Michael Lowenstein December 13, 2016 at 6:46 am (1259 comments) #

    A few years ago, Netflix threw customers a price-increase grenade that was so poorly received that they had to pull it back. Bank of America suffered similar backlash when they attempted to unilaterally add monthly ATM fees to customers. The advice offered in your points, therefore, should be taken by any company considering a price increase.

    As a researcher and analyst, I’d suggest one additional piece of advice. Potential customer response to increased prices can gauged by a technique called “threshold analysis”, in which various pricing levels are assessed, relative to the perceived product/service value proposition. This is like a DEW Line for sales and marketing, giving them some flexibility to implement the practical approaches you’ve offered.

  3. Andrew Rudin December 13, 2016 at 7:36 am (178 comments) #

    Hi Michael and Gautam: thanks for your comments. Interesting point about threshold analysis. I have read that retailers regularly engage in this type of research, under the guise of charitable giving. Starbucks has done this: “would you like to give the change to [name of charity].”

    I have little doubt that the spare change is provided to the charity, but I have read that charity is the ostensible purpose. A major reason that retailers ask this question is to learn whether there is slack in their pricing. They want to know whether consumers would be willing to give up the additional coin if the retailer builds it into their pricing. Sort of a test market precursor to a price increase. Do you know if this is true?

  4. Michael Lowenstein December 13, 2016 at 8:09 am (1259 comments) #

    I can’t claim to know what Starbucks is doing with the ‘spare change for charity’ concept, or why they are doing it. What I do know is that threshold analysis is a fairly scientific market research method for helping companies identify the demand/pricing elasticity or inelasticity of their products and services.

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