How to Write a Price Increase Letter That Keeps Your Customers

A 1% increase in price typically translates to an 8-12% boost in operating profits. Yet many small business owners delay raising prices for years, watching their margins shrink while costs steadily climb. The hesitation usually comes down to one fear: losing customers.

Here's the reality check you need—when done right, price increases don't drive customers away. Research shows that 58% of customers actively accept price increases when they understand the value they're receiving. The key isn't whether to raise prices, but how you communicate the change.

This guide walks you through crafting a price increase letter that maintains customer trust, along with templates you can customize for your business.

When to Raise Your Prices

Before drafting that letter, make sure the timing is right. Consider a price increase when:

Your costs have risen significantly. With inflation hovering around 2.7% annually and certain sectors seeing much higher increases, your input costs—whether materials, labor, or overhead—may have outpaced your pricing.

Your profit margins have shrunk. If you're working longer hours but not seeing proportional income growth, your pricing likely hasn't kept pace with your business reality.

You've improved your offerings. Added features, better materials, enhanced service levels, or additional expertise all warrant higher pricing.

Competitors have already raised prices. If similar businesses charge more for comparable services, you may be undervaluing your work and leaving money on the table.

You haven't raised prices in over a year. Annual adjustments of 5-10% are generally considered reasonable to keep pace with inflation and rising costs.

The Psychology Behind Successful Price Increases

Understanding a few psychological principles helps you communicate increases more effectively:

Loss Aversion

People feel the pain of losing something more intensely than the pleasure of gaining something equivalent. Frame your communication around what customers gain by staying with you, or what they might lose by switching to cheaper alternatives—such as quality, reliability, or the relationship you've built.

Value Perception

Value is subjective. What matters isn't the absolute price but whether customers believe they're getting sufficient value for what they pay. Reinforce the value you deliver before discussing price changes.

Anchoring

When customers see higher prices elsewhere first, your increase seems more reasonable. Without explicitly comparing, you can remind customers of the market context or the investment you're making in quality.

Anatomy of an Effective Price Increase Letter

A well-crafted price increase letter includes these elements:

1. Direct Opening

Don't bury the news or pad it with excessive pleasantries. Start with clarity:

"I'm writing to let you know that our pricing will be changing effective [date]."

Avoid phrases like "We're excited to announce" (you're not excited, and neither are they) or "We've gone back and forth on this" (which sounds uncertain and invites pushback).

2. The New Pricing Details

Be specific about:

• Which products or services are affected
• The exact new prices or percentage increase
• The effective date

Vagueness breeds frustration. Customers appreciate knowing exactly what to expect.

3. The Reason (Brief and Honest)

You don't need four paragraphs of justification, but a straightforward reason helps. Customers accept increases more readily when they understand the "why."

Good reasons to mention:

• Rising material or supply costs
• Increased labor costs
• Investments in quality improvements
• Added features or enhanced service

Avoid blaming external factors excessively or sounding apologetic—this is a business decision, not a personal failure.

4. Value Reinforcement

Briefly remind customers why they chose you. Mention recent improvements, your track record, or the benefits they receive. This isn't the place for a sales pitch, but a sentence or two reconnecting them to your value helps.

5. Adequate Notice

Give customers at least 30 days' notice—60-90 days is even better for subscription services or ongoing contracts. This shows respect for their budgeting and planning needs.

6. A Path Forward

End with how customers can reach you with questions. Make it easy to connect, and be prepared to have conversations.

Price Increase Letter Templates

Template 1: General Service Business

Subject: Update to Our Pricing Effective [Date]

Dear [Customer Name],

I wanted to reach out personally to let you know that our pricing will be updating effective [date].

Starting [date], [specific service/product] will be [new price] (previously [old price]).

This adjustment reflects [brief reason—rising operational costs, investments in improved service, etc.]. Over the past [timeframe], we've [mention any improvements or investments you've made].

We value the relationship we've built and remain committed to delivering [your key value proposition]. If you have any questions about this change, please don't hesitate to reach out at [contact information].

Thank you for your continued trust in [Business Name].

Best regards, [Your Name]

Template 2: Subscription or Recurring Services

Subject: Important Update About Your [Service] Subscription

Dear [Customer Name],

Thank you for being a valued [Business Name] customer since [date/timeframe].

I'm writing to inform you that beginning [date], our [plan/subscription name] will adjust from [current price] to [new price] per [billing period].

This change allows us to continue investing in [specific improvements—better support, new features, enhanced quality]. Since you joined, we've added [list 1-2 improvements if applicable].

Your subscription will automatically reflect this new pricing on your [date] billing cycle. No action is needed on your part to continue service.

If you have questions or would like to discuss your account, I'm available at [contact info].

We appreciate your continued partnership.

Sincerely, [Your Name]

Template 3: Retail or Product-Based Business

Subject: Pricing Update for [Product Category/Name]

Dear [Customer Name],

We wanted to give you advance notice that prices for [specific products] will be changing on [date].

Due to [increased material costs/supply chain factors/quality improvements], [product/category] will increase by approximately [X%]. For example, [specific product] will move from [old price] to [new price].

We've worked hard to absorb costs where possible while maintaining the quality you expect from us. [Mention any quality commitments or improvements].

Orders placed before [date] will honor current pricing. If you've been considering a purchase, now is a great time.

Thank you for your loyalty to [Business Name]. Please reach out if you have any questions.

Warm regards, [Your Name]

What Not to Do

Avoid these common mistakes that undermine price increase communications:

Don't apologize excessively. Phrases like "We're sorry, but..." or "Unfortunately, we have no choice..." signal uncertainty and invite negotiation. You made a business decision—own it.

Don't hide the increase. Customers who discover price changes unexpectedly feel deceived. Surprise price increases damage trust far more than the increase itself.

Don't over-explain. A paragraph or two explaining your reasoning is sufficient. Pages of justification suggest you're not confident in the decision.

Don't make it about you. While your costs matter, frame the communication around continued value for the customer, not your financial pressures.

Don't raise prices without raising value perception. If you've made no improvements and can't articulate ongoing value, consider what you might add or enhance to justify higher pricing.

Handling Customer Pushback

Some customers will express concern or threaten to leave. Here's how to handle it:

Listen first. Understand their specific concern. Sometimes they just need to voice frustration before accepting the change.

Reiterate value. Remind them of specific ways you've helped them or benefits they've received.

Offer alternatives if appropriate. For subscription services, a downgrade option may retain customers who would otherwise leave entirely. Research shows that 14% of customers downgrade rather than cancel when given the option.

Accept some departure. Industry wisdom suggests that if zero customers leave after a price increase, you probably didn't raise prices enough. Some churn is normal and expected.

Communicating Across Channels

Your price increase letter is the primary communication, but consider supporting it through:

• Internal briefing first: Inform your team before going public so they can respond confidently to customer questions.
• Website updates: If you publish pricing, update it to match your new structure.
• FAQ preparation: Anticipate common questions and prepare clear answers.
• Follow-up communication: A thank-you note after the transition acknowledging customers who stayed can strengthen relationships.

When to Grandfather Existing Customers

Some businesses offer existing customers a delayed increase or locked rate as a loyalty reward. This can work well if:

• You have strong customer lifetime values
• Retention is particularly important to your model
• You can sustainably manage different pricing tiers

However, complex pricing structures create administrative burden and can cause issues when grandfathered customers refer new contacts who pay more. Weigh these tradeoffs carefully.

Tracking the Impact

After implementing your price increase, monitor:

• Customer retention rate: How many customers stayed versus left?
• Revenue impact: Did total revenue increase as expected?
• Customer feedback themes: What concerns emerged most frequently?
• Service quality: Are you delivering on the enhanced value you promised?

This data informs future pricing decisions and helps you refine your communication approach.

Keep Your Financial Records Clear

Raising prices affects your revenue projections, profit margins, and tax obligations. Clear financial records help you understand exactly how price changes impact your bottom line and make confident decisions about future adjustments. Beancount.io offers plain-text accounting that gives you complete visibility into your financial data—track revenue by customer, monitor margin changes over time, and maintain records you can actually understand. Get started for free and take control of your business finances.