6th November, 2017
The price of croissants in France is about to go up, which is scandalous, to say the least!
But it does offer an interesting case study.
Just in case you’re not across all the butter-related news, the price of butter in France has gone up, mainly because the export market is now too lucrative to ignore.
That leaves the fine patisseries of Paris in a bind as butter is a crucial ingredient in the humble croissant.
If the price of butter goes up, invariably the cost of croissants will go up.
Producers commonly account for increases in production costs (eg. energy, staff, raw materials) by passing them on to the customer.
Telling customers that the price of your goods and services is about to go up isn’t exactly a great sales message, but sometimes it’s necessary.
So how do you break the news?
The simplest thing is often overlooked.
In many cases, a customer finds out about a price rise in an invoice.
Business owners may think that people will skim over the increased cost, especially if the increase is low, but that’s not the case.
Tell your customer clearly and concisely why their bill is higher than usual, and offer to provide more information if they want it.
In the case of the Great Butter Crisis of 2017, purveyors of fine croissants could put up a sign in their shop explaining the price rise.
Make sure your communication is understandable too. People hate reams of gibberish.
What would happen to the product or service if you didn’t pass on the cost?
Would you still be able to continue to offer the same level of quality or service if you didn’t pass on the cost?
Spelling out the alternative is a great way to let your customers know you’re passing on the cost for the right reasons, instead of using the opportunity to engage in some ol’ fashioned price gouging.
If you know a necessary price increase is coming, let your customers know in plenty of time.
As soon as you can, send out a letter or email with details of when the changes will be in effect .
Then follow up a bit closer to the date to remind your customers.
Telling your customers that the price of their service is going to rise can be unpleasant, but if it’s inevitable, it’s best to get it out of the way early.
If it’s only a temporary price rise, make sure to communicate that as well.
When you tell your customers that your prices are going to go up, you’re probably going to get a few questions.
Ideally your communication with customers should’ve taken care of most of them, but customers often appreciate the opportunity to discuss the price rise with an actual person.
A lot of it will be venting, but sympathise with them. After all, you’re going through the exact same thing.
Are your competitors passing on the price rise too? If so, tell your customers about it.
If it’s an industry-wide thing (such as the price of steel going up for those in construction) then it will help customers to understand that you’re not just doing it to squeeze a buck out of them.
If your price rise is on the lower range of the price increases in your industry, then there’s certainly no harm in mentioning that either.
BONUS QUESTION: Would not passing on the price increase help win new customers?
While the ACCC has some rules around below-cost pricing you need to take seriously, many cafes have started absorbing increased staffing costs on public holidays â€“ instead of passing them on to the consumer.
If your competitors are passing on the price increase and you’re not, this is something you can use to your advantage.
Could you view the amount you lose by not passing on the price increase as a customer-acquisition cost?
However you choose to go about it, the best policy is open and honest communication with your customers.
You may not have any control over the price rise affecting your business, but you always have control over how you respond to it.