Some business owners relish the opportunity to put their prices up. After all, the more money you charge, the more profit you make and the more successful the business is. Right? Well, maybe.
Price increases can also be a pretty daunting prospect for a number of reasons. The main concern is the risk of losing clients as a result of charging them more – especially regular or long-standing clients who are accustomed to the existing rates.
That shouldn’t mean that you stay on the same price point forever, whilst costs rise around you. We look at tried and tested ways to boost your income through a cost increase while still maintaining great relationships with your clients.
Increasing your prices while keeping customers happy
Your business needs to make enough money to:
- Sustain itself
- Support you financially
You can’t hinder your own profit-making potential because of your existing clients. You want your business to thrive, not just survive, which means raising your prices from time to time is a necessity.
No customer is ever going to be pleased to hear they need to pay more, but there are some things you can do to ensure any price increase runs as smoothly as possible.
Check out what your competitors charge
When deciding what you want your new prices to be, take a close look at what your competitors are doing. If your increased prices are close enough to industry standard or what your competitors charge, your customers will be more willing to accept your new rates and stay loyal to your business.
Be sure before sharing
Raising your rates should never be a knee-jerk reaction. You need to put a plan in place and bide your time. Do your research and finalise your new rates before you even consider what your client communication plan will be. Uncertainty or changes to the rates will only confuse your customers and reflect badly on you.
You also don’t want to pre-warn customers that you’re going to be increasing your rates without knowing what the new prices will be. Being well-prepared will help you deal with the inevitable questions and possible pushback.
Choose your timing wisely
Timing is critical when informing clients that they’re going to have to start paying you more. If you’ve just had a few bad reviews or complaints, for example, it’s probably not the best time.
Plus, don’t spring the news of increased rates on your customers out of the blue. Pre-warn them that the new costs are coming and give them a date, in the future, that they will come into action.
Be honest and transparent
Customers always appreciate honesty, transparency and authenticity. So, if you do decide to raise your rates, be upfront about it and explain why you need to do it.
Let them know you’re doing it so that you can still provide the same level of service and that it’s in response to your own increased outgoings (e.g., supply chain, materials, shipping, overheads, etc.).
The last thing you should do is hide the price increase in sneaky fees, small print, or wrap it up as any kind of benefit to them if it’s not.
Be compassionate and patient
Some customers will accept the new rates and pay their invoices without question. Others might push back or want to know more about the decision. It’s important to be patient and compassionate when responding to the latter.
Be ready to answer questions, personalise your communications as much as possible, and don’t forget to thank all of your clients for their loyalty and understanding.
Consider offering additional payment options
An effective way to soften the blow of a cost increase could be to provide an additional way to pay, such as a payment plan or instalments, that you didn’t offer previously.
Stay firm on your decision
If customers don’t respond well to the news of a price hike, it can be tempting to revert back to your old rates in order to resolve the friction and retain their custom. Your business won’t grow this way. Keep your goals in mind and stay strong.
You may consider negotiating with individual customers with whom you have a particularly good (or profitable!) relationship – it’s your call, but this might be something you ask them not to share!
What if I lose customers as a result of price increases?
A bigger bill is never going to be good news for anybody. That’s why it’s perfectly normal for a business to lose clients once they announce that prices will be going up.
Some customers just can’t afford it and others are determined to find the cheapest options or best deals on the market, so your new rates might not work for everybody – and that’s okay. You still have options.
Accept it and move on
Unfortunately, there’s not a whole lot you can do if a customer decides they want to part ways following a price increase. You can’t, or shouldn’t, try and force them to stay against their will.
Be gracious, accept the loss, and figure out how you’re going to deal with the gap they leave behind.
But stay in touch
You can let a client go but it’s important to stay in touch (with their consent). Keep them on your mailing list and check in with them in six months or a year’s time.
If they love what you offer but simply can’t afford your new prices, they may be interested to know about special offers. Or, if their own profits increase further down the line, they may be keen to have you back when their cash flow permits.
Figure out how you’re going to attract new clients
If you lose clients and need to replace them, you’ll need to turn your focus to your marketing efforts to generate new leads and convert them into new paying customers.
Invest some time into finding ways you can encourage new clients to come to you, so you don’t have to do all the chasing. This includes:
- Promote retainer rates and/or special rates for clients who provide you with regular work
- Putting a referral scheme in place
- Keeping your website, social media and search engine optimisation (SEO) up to date
- Networking, networking and even more networking
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