Need to raise your prices, but not sure how? The easiest way to increase clients is to undercut a rival’s pricing and while your business can absorb those extra costs for a while, it eventually it needs to be built into pricing.
We have a few ideas on minimizing the risk of losing your clients when you increase prices.
Start by softening the impact to your customers. We are tempted to establish a rationale point that makes sense from the owner’s viewpoint, but put yourself in the customers shoes instead.
Take into considerations these reasons for justifying higher prices:
Technology Advances: Most companies must upgrade technology periodically. Often this improves a customers online access to data or order management. This is a benefit, saving the client time or simplifying a process.
Improved service: Customer feedback has told you bottlenecks develop at checkout or the telephone wait time to reach a live representative is too long. You’ve implemented a service that connects customers to a live person immediately.
Step up over time: From the client’s perspective, gradually phasing in price increases is preferable to pushing through the total increase immediately.
Bundling: Your client uses several services you provide. Costs are rising on one. Remind them you are holding the line on pricing for the other two.
Comparisons: Inflation might be low, yet individual Consumer Price Index components might rise faster. Between 2000 to 2014, the CPI rose 69 percent. College tuition and fees rose 130 percent. Are your increases below the relevant statistical average?
Communication strategies: Customers know costs rise but they aren’t happy about it. Treat clients the same way you would like to be treated if roles were reversed.
Communication: Letters have permanence. They are easy to retain and keep front of mind. You can fit more in and hold their attention better than e-mail.
Adequate lead time: Don’t spring it on them. They may want to investigate alternatives or call to discuss with you.
Why are prices going up? Establish your rationale. You’ve invested in your business. Costs are rising everywhere (statistics). You’ve absorbed those increases for (X) years. Your increase is less than the statistical average costs have risen.
Timing: How long have you worked together? How have you gone above and beyond for them and exceeded expectations? Clients often need reminding.
Ongoing Clients: If the client is buying an ongoing service and not a single purchase transaction, spread the increase out over several months. It’s less painful.
Transactions: If they are buying a product and it will now cost more, remind them about the other products they also buy. Prices are not rising on those. This is good news.
Call with questions: You don’t want them to smolder, investigate alternatives and leave. You have history. Encourage them to talk with you.
Be upbeat: End on a positive. Thank them for their loyalty and understanding.
Afterwards, remind them: People need to hear something six times before it sticks. This old adage applies here. They might get that statement two months from now, see the higher price and make an angry call. Periodic reminders soften the impact.
Clients do business with you for many reasons. They see prices rise in other aspects of their lives. They raise prices for their clients. People can be understanding if you take the time to tell them properly and explain your rationale.