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Let’s face it: even during the economic downturn we’ve faced in the last couple of years, expenses haven’t stopped going up. So in order to survive, at some point, we web workers, business owners and managers have to think about raising prices. But how to do it without annoying and losing our customers?
We all know that it’s better to keep existing customers than to spend the time and effort getting new ones. Recently, a friend and fellow business owner asked me for advice on how she could raise her prices. Here’s the procedure we came up with:
Calculate the price increase you need. You probably know which of your clients are likely to go elsewhere when prices are raised, so run some scenarios on a spreadsheet and see what pencils out. Try to plan at least a couple of years in advance, since you don’t want to have to raise prices too often.
Create two tiers of pricing. You can generally raise prices for new customers right away, as soon as you’ve updated whatever published price lists you may have, and changed your internal systems to reflect the new rates. Keep your current clients at your old prices for now.
Schedule the price increase. Pick a date, at least a couple of months away, for implementing the increase for current customers. To simplify record keeping and tax reporting, I prefer to schedule increases at the beginning of a new year or quarter.
Notify current customers what you plan to do.
- Explain why the increase is needed. For service businesses, you may want to tell customers that the increase will be used to give the folks they deal with well-deserved raises.
- Explain that because they are valued customers, you have continued to charge them at your old rates until now. You might also want to offer the ability to pre-pay for your services at the old rates for up to 6-12 months.
Be prepared to politely deal with upset customers, in person, by phone, by email, and on social media. Try to respond to such customers individually if you can, and avoid canned responses. But be firm, and don’t negotiate special deals.
My friend and I have both followed these steps for our respective businesses in the last few months, and we’ve been happy with the results. We both lost a few clients, but fewer than we expected, and the increased revenue more than made up for the losses. And frankly, the lost customers were those with small budgets and big needs; it’s often true that those with the smallest budgets need the most hand-holding.
Have you raised your prices recently? How has it impacted your business?