At some point in your IT service career, you will be faced with the prospect or necessity of raising the prices on one or more of your services. If you are just starting out and find it necessary to adjust your charges as you gain a better understanding of your business goals and the overall marketplace that’s not so bad. We’ve all had to do that. a few price adjustments when starting out is just part learning the business and isn’t such a big deal, provided your still establishing yourself, your customer base and your business reputation.
However, if you are well established already and your prices haven’t changed much in the last couple of years, the thought of raising them on your customers is one that may make you hesitate, and rightly so. It’s a tough decision to make, especially in these troubled economic times when money is tight for many customers and competition is fierce for every dollar.
The decision to raise prices on your services should be considered carefully. The first step is to ask yourself why you need to do this. Did you set your prices too low to sustain your business and keep it profitable? Are your competitors offering the same services in your area much higher rates? Did you have recent increases in overhead (higher rent, fuel prices, materials, etc.) that necessitate a price hike to your customers to maintain profitability?
If so, the decision is inevitable. At this point, it isn’t a matter of if, but how.
The best approach, in my experience, is to first determine what your price adjustment needs to be to pay the bills and maintain profitability without pricing yourself out of your local market, create a rollout plan, and stick to it.
Before doing anything, careful planning is in order. First, you need to do some basic math and determine just how much you need to raise prices. Then you need to research colleagues and competitors in your area and find out how and what they charge for the same services you provide. Factor in the economy in your local area and what the local market can bear. Consider your established customers and what you think they can afford to pay. Also, consider what you think is fair to charge your customers based on your own experience and abilities, and the value of the service you provide. Put it all on paper and work the numbers. Then comes the hard part: raising your prices.
I’ve been there as well and although you may have a little push back from customers in the beginning, in the long run you will be better off and your customer base may actually grow.
Of course, it all depends on how you approach it. There are a couple of ways to do this. You could try raising prices incrementally, a little here or there over a period of time. The other option is to do it all at once.
You must also know your customers and their expectations. Incremental price hikes only work if you can do it over the course of a long period of time. Otherwise, raising the price $5 every few weeks or so will actually hurt, as your customers will get annoyed with the constant increases and you will get annoyed with the constant management of it.
A better way to roll it out may be to change the pricing on individual items and services over a short period of time. Change the bench fees one week, change the onsite fees another, and offer daily or weekly discounts or specials on other items or services to offset the hikes.
Whatever you decide to do, the most important thing to remember is to communicate the price hike to your customers honestly and well in advance. Communication is actually the key to the success of your price changes.
Customers don’t like surprises, especially when it comes to costs. If you quietly raise your prices and your customers are hit with the new fees out of the blue, they will not be happy. Send out a snail mail or e-mail blast to your customers (snail mail is better) and post a notice in your storefront to notify everyone of the price changes at least 30 days in advance. Be upfront about why the prices are changing and answer any questions or concerns your customers may have without spin. There will always be a few who will bail on you but most of them will understand, especially given the current state of the economy.
If you keep your customers in the loop from day one, you will find they will appreciate your situation more than you think and are more likely to accept the price changes with few complaints. You may even experience a surge in business before the price hikes, as some customers will want to take advantage of the current prices before they go up.
RE: How to raise prices without losing customers
As Rick said, communication is key. You absolutely want to keep your customers in the loop about your price increases. We service primarily business clients (for our onsite business anyway) and they understand the need for increases- as long as those increases are reasonable and don’t occur too frequently (anything more than once every few years is probably too frequent). To help ‘ease the pain’ we give our best clients a 6 month phase in period where they will stay at the old price for that window of time while our other clients are already on the new rates- and we make absolutely sure the clients getting that 6 month window know about it and understand it’s a benefit of being a long-time, loyal client. That goes a long way to buiding good will.
We’ve only had to raise our rates three times since we’ve opened our retail location back in 2004. Each time we’ve made a price change our business has actually increased- not decreased like many fear. The reason behind that is multi-faceted but is primarily the result of communicating the change well in advance and making sure the increases are reasonable and justified.
RE: How to raise prices without losing customers
Great pointers. So many of us get so wound up in getting the jobs done, we totaly forget about the price structure and how to get it to the market in a way that works for both us and the customer.
Too many times people just jack up the rates suddenly without prior notice because it was put on the back burner