Raising your prices: how to do it effectively

“The proportion of firms reporting higher costs rose from a net 37% to over half in the June quarter, while the proportion of those able to pass on higher costs by raising prices picked up to a net 41%”

NZIER Quarterly Survey of Business Opinion

The latest July 2026 economic results from the New Zealand Institute of Economic Research (NZIER) show that costs are continuing to rise for NZ small businesses. And to combat this assault on margins, 41% of respondents intend to put up their prices.

But is a price rise the most effective way to rebalance your margins in tough times?

What are the key reasons for putting up your prices?

Raising your prices when costs are on the rise helps you protect your profitability and reduce the squeeze on your profit margins. With more sales revenue coming in from each sale, you have the necessary cashflow to cover your fixed overheads.

The only alternative is to absorb these cost increases internally. But this reduces your margins and can start to erode the business’ working capital. A long-term strategy of absorbing rising costs will limit your growth and, in a worst-case scenario, even the viability of the business.

How to raise your prices without alienating your customer base

A higher price solves your margin issues. But it can also be unwelcome news for your customers. With both consumers and business customers facing a cost crisis, putting up your prices can sometimes alienate loyal customers. If you put prices up too aggressively, this can lead to lost sales and long-term customers looking elsewhere for cheaper alternatives.

So, raising your prices needs to be done with caution.

Three ways to increase prices effectively

• Be transparent and communicate the need for a price increase: No customer wants to pay higher prices. But if you’re upfront and explain the cost drivers (like raw materials or fuel costs) while highlighting recent improvements, you can soften the blow. Loyal customers can respond well to a transparent explanation, as long as the price increase is fair and you're open about the need to put up the price.

• Think about tiered pricing and segmentation: One option is to offer different price points, allowing customers to choose a product/service that matches their cashflow situation. Introduce multi-tier pricing options or phase in gradual, targeted increases across specific products. This is a better strategy than hitting customers with a single, jarring price hike across your whole range.

• Rework your discounts and payment terms: Instead of directly changing your price points, think about reviewing the discounts and perks you offer to customers. Keep your headline prices as they are, but trim back discounts for buying in volume, and rein in extended payment terms with customers. This helps to boost margins and cashflow, without the need to publicly raise your price point.

If you’re struggling with the pressure of rising inflation and overheads, come and talk to us.

Our team can help you review your current margins and discuss a potential revised pricing strategy – keeping your margins and cashflow on track.