Understanding market trends, consumer pricing expectations, and how to build your price strategy is crucial for small business owners — especially when they’re first getting started.

During CO—’s 2022 Start. Run. Grow. Week, Editor-in-Chief Jeanette Mulvey and Senior Features Editor Barbara Thau interviewed small business owners and industry experts about establishing a successful pricing strategy.  Whether you are entering a new industry, starting a business from scratch, or launching a new product, these tips will help you properly price your products and services for sustainable growth.

Start: Communicate with your customers early and often

When starting a business or raising current prices, business owners must establish a foundation of trust and transparent communication with consumers. Phil Dumontet, CEO and Co-founder of Whole Sol Blend Bar, recommends communicating “early and often,” especially when it comes to touchy subjects like price increases.

He explained how customers really do understand when you are being upfront and transparent in communicating with them. “When things come out of left field … that’s when you get into … challenges,” he said.

Meet customers where they are and communicate any changes that might impact them, but also be transparent about the reasoning behind these changes. For example, explain why you’re raising prices and how you plan to address the increase going forward.

“As soon as we have an opportunity to bring [prices] down, we will,” said Dumontet. “This is not some kind of permanent situation we’re trying to impose on customers. We are actively negotiating prices with suppliers … [and] once we have a chance to bring them down, we will.”

[Read more: 5 Pricing Models and What They Mean]

We have to be nimble. A leader needs to be communicating more often. They need to be tight with their senior team because it's an all-hands-on-deck kind of moment.

Julie Poland, Strategic Advisor, ProActive Leadership Group

Run: Offer solutions to price increases

Julie Poland, Strategic Advisor at ProActive Leadership Group, offered a few pricing strategies you can try to mitigate the impact of price increases:

  • Package your services: Packaging or bundling your services can help pass along the extra costs. For instance, consider the well-known phrase, “Would you like fries with that?” Tacking on extra products or services can ease the price increase.
  • Offer free delivery: Offering free perks to customers can lessen the risk of objection to higher pricing. For example, if a customer orders more than $50 worth of products, providing free delivery will likely prevent them from reacting poorly to the price increase.
  • Form subscription services: Forming subscription services or licensing services ensures the customers know exactly how much they’re paying each month. In the event of price increases, it will be up to the vendor, not the business, to determine what fits within the subscription or licensing box.
  • Offer loyalty or volume discounts: Rewarding loyalty or bulk-purchasing with discounts can incentivize customers to purchase from your business. Those who make routine purchases or bulk purchases will typically stay clear of a price increase while enjoying these discounts.

“We have to be nimble,” said Poland. “A leader needs to be communicating more often. They need to be tight with their senior team because it's an all-hands-on-deck kind of moment.”

[Read more: 4 Ways to Competitively Price Your Products Without Devaluing Your Brand]

Grow: Understand your strategic intent when analyzing your pricing

When analyzing pricing, Susan Lee, Commercial Strategy Leader for EY-Parthenon Americas, recommends asking yourself the following questions:

  • What is your strategy?
  • What are you trying to achieve? (e.g., high margin, higher market share)
  • What kinds of customer segments are you targeting?
  • What products are you using?
  • What do you wish to capture/convey? (e.g., premium market vs. value brand?)

“Before you start to think about the price point, you have to start with that strategic intent,” Lee said.

After setting the prices and implementing the pricing, next, consider how you can incentivize it by telling a value story.

“When we think about the intent of pricing, it is really all the way from your strategic intent to how you are implementing your price realization at the end,” she said. [Read more from Susan Lee in her interview with CO—’s Senior Feature Editor, Barbara Thau, here.]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.