It is likely that your cost of business has gone up since you started doing business or your competition has increased their prices and you want to remain competitive.
Or, it could be that you have garnered a lot of experience in your field and now realize that your work is worth more than it was before.
Whatever the reason for raising your prices, the decision to do so should not be taken lightly.
There is a significant trickle effect that happens when you decide to raise your rates that will deter even your best customers from wanting to continue to do business with you. Yet, it is sometimes a necessary evil.
So, it is best to just buckle up and learn how to do it so that you can see the highest conversion rates from your old prices to the new prices with your existing customers.
Ultimately, understanding the best time to increase them and how to do it efficiently can make the transition easier.
What Will Customers Think?
From your customers’ perspective, there is no right time to raise your prices. They do not want to pay more; no matter how valuable they may perceive your services to be.
But, that does not mean that they will not except the increased rate. So, to make the most of this transition period, you need to give your customers at least one month’s notice of any change in your prices before you put it into effect.
That means that your finances should be organized and secure enough that you can go one more month earning your old price, before implementing the new price, especially since the likelihood of losing customers in the transition phase is high.
You would also need to reach out to a company directly via telephone if that is how you have been communicating with the client up to this point.
Alternatively, you should send an email directly to the person who has been approving your work.
If you run a retail store or ecommerce store, a simple email to your mailing list with an explanation of the price increase is usually sufficient.
What Should You Include in Your Notice of the Price Increase?
There are several things you would need to include in any notice related to price increases.
If you are notifying your customers via telephone, be sure to take the time to write down the main points you want to cover before making the calls.
And, if you are sending emails or other written correspondence, make sure to include all of the following information:
- Thank the customers for their ongoing patronage and relationships with your business.
- Inform them of the price increase and be sure to set a date for when the increase will take effect.
- Explain the reasons why you are increasing your prices.
The most important part is not to undermine your own decision to increase your prices. You do not have to apologize for increasing your prices. It is your business to run as you see fit.
And, while a price increase may feel like a setback for some of your customers, if your work is of a high caliber, most customers will pay you the new rate.
So, do not say, “We know this may make it hard for you to continue doing business with us”.
Do not say anything that may show doubt in your mind.
What About Negotiating?
You might be surprised to find that some clients will respond to your email, saying that they are unwilling to pay the new rates, but they will pay you more than they were paying before.
Often, smaller businesses which cannot afford your new rates but still want to work with you will offer an olive branch and try to negotiate a single rate for their business. This is not common, but it does happen.
It is entirely up to you if you want to accept a less-than-you-expected rate. If you sell yourself short in your rates, your work will become a chore, instead of the thing you love doing.
Also, it is not advisable to offer different rates for different customers because keeping things simple is best when it comes to rates.
The exception is when the clients have been long-time customer, they do a lot of business with you, and you know you can recoup that money over time, rather than up front.
Do Not Raise Your Prices in December
With the holidays quickly approaching, you might want to avoid implementing any price increases during December.
People and businesses are already strapped for cash this time of year, with the year-end coming for many businesses and people preparing for the holiday seasons around the world. So, there is usually not a spare dollar at this time of year.
It is, however, okay to inform your clients of price changes which will take effect in the new year.
In fact, this is probably the best time to do it so that businesses can plan for your new pricing as they prepare their budgets for the next quarter and year.
If you are not ready to raise prices in the new year, consider waiting until the end of a quarter before doing so. But, be sure to give a month’s notice to your customers so they can include that information in their budgets.
Some Final Thoughts.
While it is never easy to inform clients of a price increase, you are not asking for permission to do so. You are simply doing your due diligence and letting your customers know that this is the cost of doing business with you now.
Also, be prepared to lose some customers and be prepared to increase your credibility and status as a business that does the kind of work that deserves to earn that kind of money.
Take a deep breath and start writing down all the reasons you are increasing your prices. Set a time when you will inform your customers and then send those emails. As the old saying goes, it is now or never.
So, do not put off increasing your prices because you are afraid of what your customers will say. There are millions of people out there who want and need your services; so, make a plan and get to it.
This is a guest post from John Packham. Having grown up in a family owned business, and now working as the Content Director for Karrass – a company specializing in negotiation training for businesses – John is grateful for the many opportunities he’s had to share his passion for business and writing.