Navigating Price Increase: Strategies to maintain customer loyalty

Can your business retain customers while raising prices? Businesses in Malaysia have been navigating this delicate situation, especially with the recently imposed 10% tax on online purchases and the upcoming SST rate hike effective 1 March 2024. 

While a price increase is inevitable, maintaining strong customer relationships can be achievable. With strategic planning, effective communication and innovative tools, raising prices while adopting a customer-centric approach is possible. 

Besides moving towards value-driven pricing, tools like Qashier’s customer loyalty program and QashierHQ can facilitate a smooth transition. This way, businesses can navigate the hike in taxes without eroding the trust and loyalty of their customers. 

First, why are businesses increasing their prices? 

The straightforward answer is to cushion the impact of these taxes. Businesses, in turn, face higher operational expenses as they need to pay more tax on their inputs and services. To maintain their profit margins and ensure financial sustainability, businesses might have no choice but to pass on some or all of these additional costs to consumers through higher prices.

Inflation is another critical factor. Despite Malaysia experiencing a slowdown in inflation this year at 1.5%, prices will continue to increase as long as the inflation rate remains positive. Besides decreased consumer spending and sales, businesses face increased costs in various areas: rent, utilities, and labour.  Raw materials can also rise due to various factors, such as supply chain disruptions or higher production costs. These rising operational costs put pressure on businesses to adjust their pricing. 

Coping with inflation is no easy task for SMEs; the challenge is finding a middle ground where the price increase is sufficient to cover increased costs without making their offerings uncompetitive. Another factor to consider is how customers will perceive these price increases. A sudden or unjustified hike can lead to customer dissatisfaction or a shift to competitors. Apart from striving to control retail costs, here are four ways businesses can brace for 2024:

1. Communication as the key strategy

Transparent communication with customers is fundamental when businesses are navigating price increases. Businesses must explain the rationale behind the hike in prices openly. This communication should be an informative explanation that helps customers comprehend why these changes are necessary. Such transparency can mitigate potential customer dissatisfaction and resistance.

Proactive engagement with customers is equally important in this process. Businesses should leverage multiple communication channels, such as social media, email, and in-store interactions, to reach their customer base before implementing any price increase. This approach of preemptive communication sets the right expectations and prepares customers for the upcoming changes. By engaging customers early and consistently, businesses can smoothen the transition to the new pricing structure. 

2. Adopt value-driven pricing

Value-driven pricing is a strategy where the price of a product or service is primarily determined by the perceived value it offers to the customer rather than just the cost of production or market competition. In implementing price increases, businesses can align this strategy by enhancing the value of their offerings through product quality improvements, additional features, superior service, or exclusive benefits that justify the higher price. This approach shifts the customer’s focus from the price to the benefits and superior experiences they receive. Consequently, when effectively communicated, a value-driven pricing strategy can increase customer satisfaction, as customers feel they are getting more for their money.

For example, take a leaf from AirAsia. The Malaysian low-cost airline has successfully used value-driven pricing by offering affordable air travel with various value-added services, such as convenient online booking, customisable travel options, and premium add-ons, allowing customers to tailor their experience. On the other hand, Singapore Airlines’ KrisFlyer rewards programme makes it attractive for consumers to collect miles on their daily expenses, which makes customers feel exclusive, increasing their loyalty towards the airline. 

3. Leveraging Qashier’s customer loyalty program

Indeed, a positive customer experience where customers feel rewarded can be the balm for a price increase. Make your customers feel rewarded with Qashier’s customer loyalty program. Businesses can build a customer loyalty program straight from their Qashier smart POS terminals,  eliminating the need for additional hardware or software. Such an effortless enrollment process is convenient and encourages more sign-ups, broadening the customer base. Furthermore, Qashier’s program offers customisable rewards, enabling businesses to tailor their loyalty schemes according to their specific needs and the preferences of their customers. Businesses can choose from various loyalty program types, such as cashback, points, credits, or packages designed to cater to different business models and customer preferences.

The process is easy if you’re using a Qashier POS: enrol customers during checkouts and apply rewards by entering their phone numbers. This integration enhances the customer experience and simplifies your management of a loyalty program.

4. Monitoring customer feedback with QashierHQ

You’ve increased your prices and implemented your customer loyalty program. Now what? Monitoring and analysing customer feedback is essential so that you know when to tweak your strategy. Qashier makes it easy for businesses to collect this information if you’re using our smart POS terminals. Following every transaction, customers can rate their satisfaction with your store on the dual-screen terminal itself. To better analyse and understand these customer satisfaction results, businesses can access their QashierHQ online back office to view a comprehensive overview of customer feedback. 

This feature is handy for businesses to address any issues promptly and improve their service quality over time. This feedback mechanism is integral to shaping customer retention strategies and refining value-based pricing, helping businesses align their strategies more closely with customer expectations. 

Conclusion

Effectively navigating price increases in Malaysia requires a multifaceted approach. While it might be challenging to find a middle ground, it’s not impossible. With Qashier, a business can focus on what it does best – providing great service and value to customers without sacrificing its profit margin.