Raising Your Prices (and Keeping Your Clients)
Your costs have gone up, but your quotes don’t reflect your added expenses. You need to raise your rates to be able to say in business, but you’re worried that you’ll alienate your clients or customers, especially those who’ve been with you for years. These tips can help you get the rates you deserve with a minimum risk of putting off the people who pay your bills.
Announce Price Increases
Your customers and clients are more likely to accept price increases if they aren’t sprung on them by surprise. Give your clients advance notice of price increases, while providing them with the option to order services at your present prices before the new rates take effect. A few weeks should be sufficient.
You may experience a rush of business as some clients go ahead with projects they were considering for a later date. After your new rates go into effect, you may experience a temporary lull in business. But once your customers or clients need your products or services again, they’ll be back.
Provide Tiered Pricing Options
Rather than attempt to maintain rock bottom prices, present your customers or clients with the option to pay more for more services, faster turnaround or some other aspect of better value for money. For instance, for customers ordering kitchen remodeling, you can provide the option of semi-custom cabinetry for a lower price, or a complete custom kitchen with bells and whistles such as a warming drawer, recycling center and wine cooler for a higher price.
This approach has a two-fold advantage. First, your customers who want to or must economize can still obtain good quality services for prices they can afford or are willing to pay. On the other hand, your customers who are willing to pay higher prices receive enhanced services for the money they spend. And you are able to maintain a reasonable profit margin in both instances.
Demonstrate Value Provided
In many industries, customers insist on getting rock bottom prices. However, demonstrating the services you provide should make it easier to demand the rates you deserve. For instance, if you have a reputation for consistently finishing projects on time, point out that while your rates might not be the lowest, you don’t waste your customers’ time. Likewise, if you provide top-quality workmanship, let your customers know that their dollars are well spent on service and products that are designed to last for the long term.
This strategy takes advantage of the truism “you get what you pay for.” Your customers will be reminded precisely why they’ve been using your services all along. They’ll feel good about themselves for being smart customers who understand that good quality is worth paying for.
Explain Market Forces
Sometimes honesty is truly the best policy. If you’ve been hit with hefty supply price increases or labor costs, come clean with your clients. There’s no need to go into extensive detail. Instead, if you frame your price increase in the context of expressing a determination not to cut corners in service or products, your clients will likely be more willing to go along with paying more money to maintain a working relationship with you.
One caution: if you base price increases on volatile market forces, your customers may expect your rates to come DOWN when market forces cause prices to dip, according to Inc. magazine. For instance, when gas prices were at record highs a few years ago, service providers in many industries raised their prices too, sometimes in the form of a fuel surcharge. Customers weren’t happy, but many went along with the price increases because they say their prices going up at the pump as well. However, as of May 2016, gas prices are low. Imposing or maintaining fuel surcharges under such circumstances isn’t likely to be well received.
A Net Gain
Of course, there is no guarantee that employing these strategies will prevent you from losing some business. Some of your customers simply may not be able to pay your higher prices; others will insist on bargain rates. But given the choice between raising your prices and cutting corners on quality, there shouldn’t even be a contest. And by raising your rates, you’ll be able to maintain the level of service that your customers and clients have come to expect at rates that allow you to remain in business.
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