How to Write a Price Increase Letter

What is a price increase letter?

A price increase letter is a formal notice that a business will send to its customers to inform them of a change in product or service pricing. No one likes to hear that their regular purchases are going to get more expensive, but price increases are inevitable, and the best way to avoid backlash is by letting your customers know that your prices are going to increase ahead of time.

The last thing you want is to lose valuable customers due to a price increase, but figuring out how to let them know in a respectful way can be challenging. Sending a price increase letter to customers is necessary so a business can maintain its relationships with its customers. A sudden increase in price can cause your customers to become angry, which can lead to a high customer churn and even damage your reputation.

So, in order to keep your business in good standing with your customers, you need to let them down easily with a well-written price increase announcement letter. Informing them about why your price increase is justified and necessary for your business can help you build trust and give them enough warning to prepare for increasing prices.

What are common reasons to increase prices?

Every business will have to raise its prices at some point so it can continue to make revenue and stay afloat despite inflation.

Of course, it’s important to keep your customers happy with low prices, but if that comes at the cost of losing money, it’s not a wise business decision. As a business owner, it’s important to know how to price your products so that you can continue to turn a profit.

There are many reasons why a business may increase prices, such as:

Increase in material costs

If the price of the materials you need to make your products increases, then you’ll need to increase the cost of your products as well. The same goes for a spike in labor costs. You can’t continue to sell your products at the same low price if it costs considerably more to make your products or deliver your services. You’ll inevitably need to increase your prices in order for your business to make revenue.

Rising labor costs

Staffing expenses are a significant portion of operational costs for most businesses. Minimum wage increases, rising healthcare benefits, competitive salary requirements, or the need to hire specialized talent all contribute to higher personnel expenses. These increases in your labor costs must be reflected in your pricing to maintain sustainable profit margins.

Increase in production and distribution costs

Beyond direct materials, the costs to manufacture and deliver your products can rise significantly. This includes:

• Energy costs and utilities for manufacturing facilities
• Equipment maintenance and upgrades
• Warehouse storage fees
• Fuel surcharges and shipping rates
• Packaging materials
• Technology infrastructure costs

Tax changes at the local, state, or federal levels can also impact your cost structure. For instance, new environmental regulations might require investment in cleaner production methods, or tariff changes could affect imported components.

Improved quality

Say you want to improve the quality of your products and to do so, you need to buy more expensive materials from a high-end source. In this case, it’ll cost you more to make your products, so the price of them will also have to increase so you can continue to make revenue. Even if your products are going to look the exact same, it’s still necessary to send a price increase notice so your customers can be prepared.

Strategic quality improvements often necessitate price adjustments. When you invest in superior materials, enhanced features, or more refined production processes, these improvements add value for customers but also increase your costs.

Consider a software company upgrading its platform with advanced security features, an improved user interface, and faster performance. These enhancements deliver greater value but require significant development resources.

Even when physical appearance remains unchanged, behind-the-scenes quality improvements in durability, reliability, or performance can justify price increases. The key is articulating this added value clearly in your price increase notification.

Business growth

Business growth is very exciting, but it also means you might need to increase your prices. The more customers you have, the more you can increase the prices of your products, which can be upsetting to your existing customers. To combat this, it’s a good idea to offer new services or benefits to your existing customers so you can keep them satisfied despite the price increase.

As your business scales, new cost structures may emerge because expansion often requires:

• Larger facilities and increased overhead
• More robust customer service teams
• Enhanced quality control systems
• Additional management layers
• More sophisticated marketing and sales operations

Industry trends

To stay up to date with trends in your industry, you may have to increase your prices. Increasing your prices ensures that you’ll be able to compete with other businesses in your industry. In order to keep up with your industry standards, it might be a good idea to conduct a competitor analysis. A competitor analysis will tell you how much your competitors charge for their products and if their price reflects their quality, so you can see how yours compares and make adjustments as necessary.

Market positioning is critical for business success. If your prices are below industry standards, customers might question your quality or sustainability. Conversely, pricing too high without clear differentiation can drive customers to competitors.

Industry trends can be influenced by multiple factors that may require you to make price adjustments. These include:

• Shifting consumer expectations about what constitutes "standard" vs. "premium" offerings
• Industry-wide material or labor cost increases affecting all competitors
• New entrants disrupting the market with different pricing models
• Technology advancements changing production costs across your sector
• Market consolidation leading to pricing power shifts among key players

5 tips for writing a price increase letter to customers

Writing a letter to customers about a price increase can be a difficult situation to navigate. You don’t want to write a letter that’s going to trigger backlash or cause your customers to get frustrated. You need to be very careful with your wording so that you can inform them about the price increase in a way that’s nice and respectful.

Here are five tips for writing a letter about price increase to customers:

1. Send the announcement well in advance

For a smooth transition, you want to give your clients and customers plenty of time in advance to prepare for this price increase. If your business is something that they purchase from frequently, they may have to cut back on other costs so they can continue to afford your services with the price increase, which is something they’ll have to prepare for in advance.

Letting them know well in advance gives them enough time to come to terms with the price increase and make any adjustments. It’s also a good idea to encourage them to make a few additional purchases before the increase actually occurs. At the end of the day, you want them to know that you kept them in mind, as that shows how much you care about keeping them as customers.

2. Be direct

Don’t tip-toe around the issue, as this can be misinterpreted. Instead, be direct and to the point, and avoid long, written essays. Rather than writing a long email or letter, provide a few key points about the updates to the product or service and other relevant information, such as the effective date when the product or service pricing will officially change.

You don’t need to go into great detail about your pricing methods or other information about your business. Get to the point as quickly and nicely as possible. Your customers don’t want to spend their whole afternoon reading an essay, especially about something that affects them negatively.

You also don’t need to be overly apologetic in your letter. You can acknowledge that a price increase is unfortunate, but it’s not necessary to go into any more details about how sorry you are for any issues it may pose. You need to be firm in your decision and let your customers know that this is just what has to happen so your business can remain open.

3. Provide your justification

In order to write an effective price increase letter, you need to provide your justification. You can’t just tell your customers that your prices are going to double and expect them to understand why. You have to explain why in your own words, as it can help prevent high customer churn.

When drafting your price increase letter, explain to your customers why you’re increasing prices and paint the value of your product in a positive light. Provide details on the value your product will bring to them and that the new price will be worth it.

For example, if you’re raising your prices because you want to improve the quality of your products, make that clear in your letter. Describe in detail how much better these products are going to be, so customers can be excited for them rather than upset about the price increase.

If you’re raising prices because your company is growing, tell your customers that. Be honest with them and let them know that the price increase is justified so they don’t think you’re raising it just because you want to.

One of the best customer retention strategies is to connect with your customers. Providing your justification for a price increase shows your customers that you can be transparent with them and that they can trust you, which can improve your customer retention.

4. Be personable

While your price increase letter should be professional, that doesn’t mean you can’t add a personable aspect, too. You want your letter to sound like it was written by a human who empathizes with the frustrations of a price increase and not by a robot that’s regurgitating information. Being personable in your letter is also a great way to connect with your customers, which is important for customer retention.

Remember, you’re a human talking to other humans rather than a standard marketing email designed for a large audience, so make your price increase letter compassionate, show your customers you appreciate them, and address any concerns.

Even if you’re planning to automate your emails, make sure there is still a personable aspect to them, such as including the recipient’s name. When your customers can tell that you took the time to craft an email, they’re going to respond in a much more positive way.

5. Offer support

With a big change, especially when it comes to price, there are going to be a few customers who may be upset or confused, so you need to offer a way of support in your letter. This can be directing readers to an FAQ pricing page where they can find more information or providing information for your customer service team.

A price increase can be detrimental for some customers, especially if they have to adjust other aspects of their life to account for the increase. So, it’s crucial to offer support at the end of your letter and let your customers know that you’re there for them.

Reassure them that they can always go to you if they have any other questions or concerns about the price increase. You want to give them the opportunity to reach out because if you don’t, it’s likely they’ll turn to your competitors.

How often should you raise your prices?

Before you go and send out your price increase letters, you need to be absolutely certain that this price increase will stay the same for at least the time being.

You don’t want to go through all the work of writing a price increase letter only for your prices to increase again a few months later. Frequent price increases can push your customers away and reflect badly on your part.

It’s recommended to only raise your prices about once per year, as multiple times throughout the year can seem “sneaky” and send the wrong message to customers. So if you need, give yourself some cushion by raising prices a little higher to avoid delivering bad news multiple times in a short time frame.

Price increase letter template

If you’re struggling with how to write a good price increase letter, it might be helpful to use a price increase letter template. A price increase letter template provides the outline of what your letter should say, so all you have to do is plug in your own information, tweak it as you want, and you’ll be good to go. Here is a price increase letter sample that you can mimic to write your own:

Dear [Customer Name],

We appreciate your continued support of [Business Name]. Due to unforeseen shipping and materials costs, we will be making a small price adjustment to [Product/Service] by [$ amount]. This price increase will take effect on [Date].

This was a difficult decision to make, as we know the effect it can have on our customers. We thank you for your understanding and support during this change, and as always, we promise to deliver the highest quality products and services possible. If you have any questions, comments, or concerns, please contact us at [Phone Number/Email].

Sincerely, [Company Name]

Wrapping up: How to write a price increase letter

A business functions to serve its customers, and as a business owner, your primary goal is to make sure your customers are always happy. But sometimes, you may be faced with a situation that no business owner wants to find themselves in, and that’s having to make a price increase.

Making a price increase is inevitable for any business. Maybe you want to improve the quality of your products and so you need to buy more expensive materials to make them, or your production and distribution costs have gone up.

Or perhaps, your business is growing and you need to raise your prices to keep up with the rise in demand. Regardless of your situation, a price increase is really the only option for your business to stay afloat. And although it might make your customers unhappy, it’s just what will have to be done.

Managing a business is no easy task. You have to deal with customers, price increases, marketing campaigns, and so much more. But if you need help with operating and managing your business, you can use Mailchimp.

Mailchimp is an email platform that helps businesses function more efficiently. With Mailchimp, you’ll get access to marketing tips, email templates, creative tools, and so much more, so you can create successful marketing campaigns and connect with your customers in new ways.

So whether you need help with how to write a price increase letter or how to market to your target audience, you can get it all, and more, with Mailchimp.

Price increase letter: FAQ

What is the purpose of a price increase letter?

A price increase letter’s main purpose is to inform customers that there is an upcoming price change in a business's products or services. Formalizing this notice allows businesses to be transparent about the price increase and provide more context around why it’s happening. When a business decides to increase its prices, it's critical for them to let their clients and customers know ahead of time—to avoid any major backlash.

It would be a shame for your company to lose customers simply because you are changing your prices or pricing structure. Being upfront about these updates allows businesses to maintain a good reputation with their loyal customers by sending them a price increase letter.

How do you introduce a price increase?

The best way to introduce an increase to your customers is to write a price increase letter. As a business, price changes are common and justified. All businesses will raise their prices at one point or another for a variety of reasons, including:

• Increase in material costs
• Increase in production and distribution costs
• Improved quality
• Business growth
• Industry trends

Whatever your reasoning may be, it is important to let your customers know ahead of time through price increase letters, emails and social media posts. Explaining your justification behind a price change to your customers will further build trust in your business.

Also include any benefits your customers will receive from this price increase. For example, if you’re improving the quality of your product, be sure to let your customers know that there is a correlation between what they will be paying and what they will receive.

Should you always announce a price increase to clients?

Yes. Announcing a price increase in some way is always a good idea. You never want to blindside customers that have been loyal to your brand. Transparency is key when it comes to customer loyalty and client retention.

Announcing a price increase through a price increase letter, listing it on your website, and posting it on social media gives businesses a chance to tell their customers why the change is happening now. As a business, you should explain where this extra money will go, how the product/quality will improve, or if it’s going towards increased operational expenses.

How do you tell a customer the price is non-negotiable?

Wording a price increase letter can be tricky, you want to be informative, yet stern—these prices are non-negotiable. Depending on the type of business, you can implement a pricing increase strategy that rolls out over time so it won’t shock your customers.

However, that is not possible for all businesses. In your price change announcement, make it very clear to your customers that these changes are being made for a reason and that your business did not make this decision on a whim. You want to build trust in your business and want your customers or clients to know that while a price increase might be inconvenient in the short term it will benefit them in the long run.

Key Takeaways

• A well-crafted price increase letter is essential for maintaining customer relationships and preventing backlash, giving customers advance notice while clearly explaining the justification behind the change.
• Effective price increase letters should be sent well in advance, be direct and concise, provide clear justification for the increase, maintain a personable tone, and offer customer support options.
• Common legitimate reasons for price increases include rising material costs, increased labor expenses, higher production and distribution costs, quality improvements, business growth, and adapting to industry trends.
• Price increases should typically be limited to once per year to avoid customer frustration, and communications should be transparent about the timing and reasoning to maintain trust and customer loyalty.