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Monday, July 06, 2015

My prices need to go up – how do I break it to my customers?

Deciding how much to charge for your product or service is always difficult, especially when you are looking to increase fees. Price is totally dependent on the state of your market, what the competition is like and how in demand you are. The key thing to bear in mind is that your fees need to be consistent with the market norm – there’s no point raising your fees beyond your expected rates because your clients will find someone else who will suit their needs. Make sure you are always competitive.


Fees are generally based on delivery – the more reliable, efficient and better your service is, the more clients are willing to pay. As long as you can justify the fee that you’re charging generally, your customers will be happy to pay. However, you should communicate with your customers clearly.
Clarify your actions by making clients aware of the benefits attached to using your service and why it’s worth the increase. You need to make them feel as if they’d be lost without you and that you have aided their development and positively impacted their business. Ideally, you want them thinking: “I’m surprised you didn’t do this months ago!” 
If you can solve their problems, and if the problems are important enough to solve, then they’ll pay you an appropriate fee for the solution.
In terms of structure, this sort of change is completely relative to you and your business so I wouldn’t necessarily follow a specific template. However, what I would say is make sure you raise your fees high enough so you don’t need to increase them again for at least another year or two. Frequent fee increases will never be welcomed; instead they will create a lack of confidence among your clients as they will start to think you’re struggling and don’t know how to run a business.
When you are ready to introduce these changes it is absolutely vital that you speak to your clients. There’s nothing people dislike more than dishonesty, especially when they’re paying for a service. Make them feel like they are important by keeping them informed. I recommend giving at least two months’ notice of any fees increase so they know exactly when to be expecting a change in payment terms. By calling your clients and making them aware of the changes personally, they will be more likely to stick with you because you can explain first hand why the changes are being made and, if necessary, pitch to encourage them to stay with you.
People don’t like coughing up more money for something they’ve always had cheaper so be prepared to lose a customer or two. Of course this isn’t an ideal scenario but sometimes you have to take a chance. It’s better to know now and be disappointed by one or two defectors who may have gone eventually anyway if they were solely concerned with pricing rather than the full servicing package you offer. It’s best to take a risk than always wonder: “Should I have done that?”
Ultimately, people will pay what they think a product or service is worth. So as long as you can prove you are good value for money, you shouldn’t have anything to worry about.
Good luck!
-James Cann
Founder and CEO of Hamilton Bradshaw

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