Strategy — map it out yourself

Price Increases — How To Avoid a Backlash?

Explain yourselves and give gifts

In 1977 psychologist Ellen Langer and her research team at Harvard University conducted a study. Langer asked her research assistants to cut in front of innocent people waiting in line at the photocopiers in the library.

A researcher would spot someone waiting at the library copy machine and walk over with the intention of cutting the person in line. Then, the researcher would look at the innocent bystander and ask them one of three questions:

Version 1 (request only): “Excuse me, I have 5 pages. May I use the Xerox machine?”

Version 2 (request with a real reason): “Excuse me, I have 5 pages. May I use the xerox machine, because I’m in a rush?”

Version 3 (request with a fake reason): “Excuse me, I have 5 pages. May I use the xerox machine, because I have to make copies?”

Version 3 didn’t make much sense. Using the phrase “because I have to make copies” was not a reason for skipping the line. Everyone waiting in the line needed to make copies. The phrase contained no new information, but the researcher was trying to use it anyway.

But, surprisingly to the researchers, version 3 worked best.

We need reasons

A month ago, Apple Company sent me a message informing me that it increased the price of my monthly subscription by two dollars. Of course, two dollars per month is not the sum to worry about, but I was upset. It looked as if Apple only increased the price so the company could earn more.

Two weeks ago, a car-sharing company also informed me that they had to increase the price of their service. But they, in contrast to Apple, sent me a long message explaining why they didn’t have any other options and apologized. I wasn’t particularly happy to pay more for the same service, but my reaction was calm.

In one of his books, Rolf Dobelli describes a situation in which he was trapped in a traffic jam on a highway. His reaction was predictably negative. But the next time he was sitting in the traffic, he noticed a billboard saying “we are repairing this road for you.” It was another example of an absurd explanation — it was obvious that workers didn’t renovate the road for themselves. But Dobelli’s reaction was much milder.

If you must increase the price of your products or service because you don’t have any other options, take the trouble to explain your decision to your customers in detail. Of course, they won’t be happy, but their reaction won’t be that negative.

Give more for more money

If your customers buy your products or service, they see the deal as fair. This is because they believe that the value they receive corresponds to the money they pay. But as soon as a company increases the price, for whatever reason, the deal begins to seem unfair, and that’s the reason for the negative reaction.

So, if you can accompany the news about a price increase with a symbolic gift for the customers, it will reduce the number of negative replies, even if the value of the gift is significantly lower than the difference between the new price and the old one. Consumers will be sad anyway, but it will create an illusion that the new deal is not that discriminatory.

Talk to your customers

Some companies have thousands of clients all around the world. It makes it difficult to talk to each of them personally. But even if it is impossible, make your price increase message as person-to-person as possible. This message must be signed by a CEO or a founder, and put a respective photo in the message. Don’t address a client as a “dear customer,” find a way to place the client’s name in the message. There is nothing worse than standard, impersonal messages about price rises. If possible, ask your sales team to make face-to-face phone or Zoom calls with your key purchasers.

A little humor wouldn’t hurt, either. Once I was a user of a car-sharing service named, for unknown reasons, Squirrel Cars. They also raised their prices a couple of times, but every time they did, they sent me a message like this: “Dear Svyatoslav! For the sake of all the squirrels on the planet, forgive us for raising our price — we just had to!” It was difficult not to smile reading this message.

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