Raising your prices: Why, When, How
Let's start off b saying that for the most part, most, if not all, of your clients will be unhappy when you increase your prices, and you may lose some due to it. So why would you?
Things change, services change, people change. There is progress, so we need to adapt.
1. People change: whether increasing education or training, with all of this, people have a value for their time or services. With added education or skill you may see prices increase.
2. Services change - whether through technology or evolution, services can become more complex (think of your car repair) and therefore the prices or time dedicated to completing a service may change.
3. Things change: the environment, inflation, currency, the economy. If the dollar softens, at some point in time the absorption may be passed on to clients. If minimum wage goes up too much, at some point the costs of the services may have to go up.
It's not always about profit, sometimes it becomes about the value of the service. At the same rate the value for the service increases and the profits diminish, where they should coincide.
To say that there is a magic date or preferable time of year to raise your prices would be a myth. It seems logical to do it at the beginning of the year or at some significant point.
1. If there has been only a slight change, perhaps its not the most logical time to raise your prices, but over time those nickel and dime changes can lead to losses so at some point you will need to make the decision to increase your overall prices.
2. Are your competitors increasing their prices? Sometimes its an indication of the times, services and overhead has been consistent in your industry so, if it works for you, it can be a good consideration.
3. There has been a change in the way your services are seen. For example, if people start to view you as the 'cheap' solution and you are a business providing a valuable asset, being seen as 'cheap' may not be in line with your overall strategy.
If your prices are seen as too high, this could be a great time to add value.
Loss leaders: some companies use the loss leader strategy, if this turns out to be the sole core of your business and does not generate other opportunities, it could be a good item to reflect on.
4. If you starting to attract the wrong clients, consider your pricing strategy and adjust if needed. If you find the people you are attracting to your business are always looking for freebies, discounts or end up being late or non-paying, it could be time to change the way your business is viewed. If your clients don't value you, they never will, its best to attract and retain the clients that will see the most benefit from your services.
5. Increase profit. I say this last because I wouldn't use it as part of my strategy. I believe that if you do good work, good people and great clients will come. But you may need to increase profit in order to grow, in which case, it can be the opportunity to build equity for future growth.
There are lots of pieces of advice for people looking to raise their prices and learning how to approach clients with the idea.
Always thank them for their business.
Be transparent, if your overhead has increased, let your clients know
Highlight the benefits of your service (though your clients should have seen this all along)
Offer an option/alternative
Show how you came up with your new pricing (if possible)
Do your research - find out what your competition is charging so you have something to compare to
You can offer discounts to offset some of the price increase
Raise your prices enough that you will not have to do it again anytime soon
Package or bundle your services so that clients can see additional value
Be open to comments and feedback from your clients.