The Lowdown on Raising Prices

Low_downWhat’s your pricing strategy? Are you working savvy so your talents will yield the treasure you seek or working 70-hours a week for too little reward? Pricing choices you make today affect your customer’s expectations far into the future. Your service pricing strategy is the key to unlock your treasure or seal your fate. Here’s how to raise your service prices.

Are your Service Prices Too Low? Do your competitors charge 25%-30% above your service rates, yet provide less value than you? Is your expertise more thoroughly researched, your response more timely, and your concern for quality more genuine? Then it may be time to raise your service prices.

Before you raise your prices:

Do your customers know the price for quality service in your field? They may NOT know about your competitor’s prices? They may not know the dismal caliber of results produced. Make sure customers know how good you are without criticizing your competitors. Do your own research. Be prepared to explain why you’ve been charging such a low price in a way that will allow you to raise your prices later.

Are your customers seeing your value? If your prices are too low, your customers may be assuming your service is not good. Make sure your customers are aware how you go the extra mile for them thru: • Friendly reminders of a specific extra service you’ve done • Preparing a written handout such as ‘Our 9 Point Difference’ • Telling stories (without mentioning names) of others you’ve helped

Customers Accept Price Increases

Is your dance card filling? Your first years in business, low prices might have helped fill your schedule (your dance card). In reality, if you are effectively marketing into a needed niche, doing good work, and developing trusted relationships; that was more likely the cause. As your schedule fills, now is the time to look at your pricing. Don’t wait till your dance card is too full. Raise your prices 5-10% with your new customers. Also, test raising prices with those customers that most difficult to work with. Don’t touch existing good clients just yet; read on.

Is raising your prices fair? If you can equate your price increase with a cost increase, your existing clients will more likely consider the price increase to be fair. Because your main cost is most likely your own underlying hourly pricing, you may need to creatively review your overhead costs. These include licensing, software, office improvement, staff improvements, and cost of transportation. These bring benefit to your customers. They allow faster response, larger projects, continued service, etc. Think of the customer value as you explain the price increase.

Has the customer been enjoying an unprecedented discount till now? Are your best customers are now getting a 25% discount compared to your new current pricing? As you raise your new customer prices, those can be used to help justify raising favored-customer prices. “John, you are one of my long time customers. Your price continues to be well below my current price. Your next year’s still discounted price will be…” By the way, letting your long standing customer know that he has favored discount status will help if he meets one of your new customers. Wherever possible (without being tacky) remind him; everyone likes to be treated as special.

Have you given them fair notice? No one likes surprises; especially if presented as a challenge. With small numbers of repeat clients you can send a letter introducing new services and new prices. Late in the year is a good time to casually mention next year’s prices when you see all your clients in a routine relationship. Also, if you create a practice of small price increases every year, the increases become more palatable instead of one large 20-25% increase surprise every 3-4 years.

Do you have something extra to add in? Another way to make raising the prices easier on your clients is to add in an extra bonus. Do you have a report that you sell? Do you have a preventative visit you could make? Make sure your add-in is something of perceived value but costs you less than the increase.

One last caution

Know your service pricing strategy plan. Where do you want your skills and quality to place you within the pricing spectrum for your market?
What values and benefits will you ultimately bring to your clients that make your prices seem fair? While you don’t have to have every last detail mapped out, you do have to think like your customer to get there.

If you begin to see symptoms of Chronic Client Undercharge – call Merra Lee to discuss a cure.

Are you getting back what you put into your business? Merra Lee Moffitt learned the hard way while building her own 40-person consulting practice. Now, as a SCORE counselor, small-business profitability consultant every day is spent giving back. She directs business owners in techniques that make, keep and grow more from their businesses. Your first question is free. Call her at 888-920-2030 or email her at merralee@captureprofits.com. © Copyright 2005 Merra Lee Moffitt