What Is a Price/Rate Increase Letter?

Have you reached the point where you have difficulty telling your customers or clients in person your decision to increase your prices or rates? If so, consider communicating through a price/rate increase letter.

A price/increase letter is a type of business letter sent to customers or clients to formally secure notification and provide information on the changes in your products’ prices or your services’ rates as well as the manner on how this increase was decided. Commonly sent by small business owners and freelancers to customers or clients, this type of letter should ideally emphasize the value added to the prices and services to persuade your letter recipients to understand your end fully. And by value, this has nothing to do with mentioning the amount added but rather the worth you give and put into your products or skills.

An ideal price/increase letter does not contain any apologies. It may indicate your reasons for increasing, but the letter should not mainly dwell on this. The tone of this letter is professional; however, you should write with confidence so you can successfully impose how much you or your services are worth.

Why Should You Write and Send That Price/Rate Increase Letter?

You are not alone. Many consider this as an undertaking that many do not take lightly, especially among small businesses and freelancers. This feeling is often caused by thoughts like “What if my regular customers will stop going to my store and look for cheaper ones?” or “What if my loyal client will look for a new freelancer with lower rates and stop contacting me?” And of course, the dreaded “What if I get broke?” question that, even when unanswered, will lead you to the broke life anyway since you keep on undervaluing yourself.

Make your customers or clients know what you are worth by charging them with how much you are worth. If you still don’t increase your prices and rates, you send a message to your clients or customers that you have no idea how to run your business. Or you have doubts on how to price yourself. So, why should they be confident in buying your products or avail of your services if you have no trust and confidence in your judgment?

If it finally dawns that you are undercharging and it causes you more loss than profit, then that should be enough reason to write and send that price/rate increase letter you’ve always wanted to send. Who knows? Your customers and clients turn out more understanding than you think and accept your price/rate increase more positively than expected. However, if it still worries you that you will lose customers and clients right away if you increase your prices and rates all of a sudden, consider raising it within a certain time interval so it will be more bearable on their end and that it will also give you peace of mind.

The Right Reasons to Increase Your Prices/Rates

Part of writing this type of letter includes justifying why you are increasing your prices or rate. Know that you just can’t increase without any basis. Price increase or rate increase can be a delicate matter for some of your clients or customers, and if your increase is baseless, they will most likely complain and alienate you with no second thoughts. However, know that you have every right to increase your prices or rates if you see the need to do so. If you are still worried about increasing, here are the right reasons that can back up your decision.

The Need for Business Growth: You should not focus solely on increasing the number of your customers, but you also need to find ways to grow your business. Sure, it feels good to have lots of customers coming in and out of your small store because you have lower prices than others. But what if the reason why your store is still small after all these years is that you kept the same prices even after your suppliers have already increased their prices? It is not a guarantee that the number of your customers will make up for the supply of your costs since it could be more expensive that way. Raise the prices of your products to attain the business growth that you need.Determine High-Quality Customers: When you finally start your new prices rolling, you can easily identify the customers who hinder your growth―these are the ones who would complain a lot even with the minor price or rate change. And the good ones? They would even be the ones who will encourage you to increase! 17% of Americans will gladly pay more to a business if it meets the standards of outstanding service. Now that you know who your high-quality customers are, you can solely focus on giving them quality customer experience. To convince you more, know that 60% of businesses who are focused on this aspect have gained more profit compared to those who don’t.Your Worth and Value Increased: If you are a freelancer and you took the effort to enhance your skills by acquiring more certifications, then you have the right to increase your rates as a freelancer. If you ensured that your products or service gets its much-needed update or rebranding, then your business can increase the prices of its products and services. Know that any investment you make to improve or enhance your products or services is another valid factor that you can use as a basis to change your old price or rate structure. Upon informing your customers or clients about this, the right ones will appreciate your efforts. They will trust you enough to understand that they will get what they pay for. Keep Up With Things You Can’t Control: As a small business owner, there are some things you can hardly take control of, and one of these includes the inflation rate of your country. When this happens, it will be difficult for you to hire more employees and give wages to your current ones. It will also be tricky for you to pay operating costs, and worse, secure a smooth financial flow into your business that enables you to create or supply products to sell. And if you want to keep up with the things that you cannot control in the business industry, increasing your prices or rates may be the only way to keep up with your financial health or profit margins.

How Do You Compose a Well-Worded Price/Rate Increase Letter?

It’s unlikely that your clients or customers would be pleased to know that you’ve increased prices or rates.

Even if you have the right reasons to do so, you need to acknowledge the fact that this move is something they might find hard to accept. That said, keep the following guidelines in mind to help you out in carefully composing a well-worded price/rate increase letter that your valued customer will accept wholeheartedly.

Step 1: Never Beat around the Bush

Beating around the bush should have no room in a price/rate increase letter. Upon writing your statement, state the amount added and the effective date of the increase as early as the introductory paragraph of your letter. Write your statement directly to the point instead of writing a monologue about how much you love and adore your customers.

There is a likelihood that your clients or customers will not read the rest of your letter if you start it off with dragging and unnecessary flowery statements. That is why right from the introductory part of your letter make your intention known―they will appreciate it more if you cut to the chase and get to the point.

Step 2: Justify but Emphasize Your Value

You must justify all the right reasons for your increase in the supporting paragraph of your letter; however, do not spend most of your letter’s contents on this matter. You need to emphasize on the value added to your work instead of solely justifying your decision to increase your prices/rates.

For instance, you’re a freelance graphic designer who used to charge $65 when you still had a handful of clients, and when you only had a few certifications. But then recently, you acquired another certification that did not only enhance your designing skills, but it also enabled you to work faster than before. Your value here is the enhancement of your skills and the production of outputs within a limited time. Communicate this with your clients. If some wouldn’t understand the increase in your value, then you can now easily sort the wheat from the chaff.

Step 3: Feeling Apologetic? Don’t Be!

Avoid feeling compelled to include a sad story of how apologetic you are with your price or fee increase―this won’t look good in the eyes of your letter recipients. Do yourself a favor and don’t like you have not thoroughly thought out of the situation. To avoid sounding like you are remorseful beyond compare, stick with the facts. Stick with the fact that you have every right to increase your prices or rates to keep your business afloat.

While you can genuinely feel apologetic toward your clients and customer who stuck with you since day one, you need to stick to your decision. Don’t sound whiny and appear like you are an indecisive business owner or freelancer, or else you will be seen as an incompetent business individual who knows nothing about his or her costs and profits and has no control over the business.

Step 4: Use a Professional but Thoughtful Tone

Yes, you are advised to write directly; however, do not write rigidly as if you are giving them a ‘take it or leave it’ ultimatum. Be mindful of your choice of words when writing the contents of this letter. Write in a personal manner, such as incorporating their names, if you think that it can help in getting your message across your clients or customers. No matter what you do, always find a way to show respect for the relationship between you and your clients or customers.

Another way of maintaining a thoughtful tone throughout the content of the letter is to include a statement of thanks where you can express your gratitude to your clients or customers. This statement naturally has a positive tone that can encourage them to continue as your loyal patrons.

Regardless of your strategies to keep the business in the game, keep in mind that in life, you win some, and you also lose some. Some customers or clients will remain loyal to you even after your increase, and some customers will leave you. And guess what? That’s okay, and there is nothing you can do about it. So, go ahead and write and send that price/rate increase letter and keep in mind that you do not need your customer’s permission to do so―all you need to do is just to inform.