“Easier said than done.” Nowhere is that old axiom proved true more than when you attempt to raise prices for your long-time, faithful clients. In the last issue, I wrote about why raising prices is a perfectly logical and understood business fact of life. If we are not careful, our fear of raising prices can stunt our company’s growth and keep us from seeing the true fruits of our labor. However, agreeing with the concept of increasing prices and actually doing it are two entirely different things.
What can you do as a business owner to keep client retention as high as possible while getting accustomed to your new way of doing business?
Consider these three pieces of advice:
Be Worth the Raise
Bottom line, if you are giving sub-par service, you will struggle to raise prices. If people are already not entirely satisfied with your work, chances are that the only reason they are staying with you is because of your prices. So, if you plan on raising prices in the future, you need to make sure the product you offer is worth the raise now. Reach out to successful business owners you respect and ask for some constructive criticism. Call a cross-section of your customer base to find out what they love and what things they maybe not so much love about your company.
If you have an office staff, ask them what the common complaints about the company are. It may be things you are already aware of but sometimes hearing them, with the purpose of addressing those issues, makes them more urgent. Whatever way you decide to manage your business’s value to your clients, make it a priority to clear the way for price raising later.
Nothing will send your customers searching Google for a new window cleaner faster than feeling like a bomb was dropped on them. You will get some pushback if you wait until you show up at their house before letting them know their prices have increased. Even if they pay the new price for cleaning, you can bet that they will start calling around to see what other companies are charging as soon as you leave their house.
So, be smart about it: Communicate
Let them know when the increase will take place. Give them as much time as you can, months if possible, to make any adjustments they need budget-wise. Let them know why you must raise their prices. Go into detail if you can. Customers understand that as supplies and gas get more expensive, the cost of services will increase. Being upfront about your reasons for the raises helps them see the situation from your point of view. Then don’t forget the most important part of this process: Let them know you care. Express to them that you understand this raise may affect them adversely. Help them understand that you would not impose this price increase if it weren’t important for the long-term financial health of your company. Let them know that you view them as more than a transactional relationship, but as people you want to do well.
Changing the narrative in their minds from greedy business owner to fellow human, just trying to keep their business afloat during these tumultuous times, will go a long way in maintaining customer retention as high as possible during the transition.
If you have gone ten or more years without raising prices, there is a good chance they are waaaaay lower than what you need them to be. The temptation may be to increase prices by 30% or more across the board and just be done with it. The problem with the “ripping off the band-aid” approach is that it will, by design, cause an immediate shock. That may not be bad if your goal is to eliminate low-profit customers immediately and only retain those who are willing to pay what you want to charge. Your new prices may be reasonable and fair in your market, and it is within your rights to insist on that.
However, the chances are that your customers don’t know or care about your market. They only know what they paid last time and expect to stay in the vicinity of that price. Therefore, if your goal is customer retention, consider raising prices gradually rather than all at once. A quarterly to yearly schedule of raises may mitigate the shock factor and allow them to ease into the increased budget needed to keep you as their window cleaner. Again, adequate communication about the schedule will keep the price increase from becoming a cause for irritation every time you come by. Whatever you decide to do, your clients will appreciate the consideration you show to them by allowing them to ease into the new price rather than having it dropped unceremoniously into their lap.
Running a profitable business is not for the faint of heart. By being a thoughtful and considerate professional, you can do what is in the best interest of both your clients and your business.
While it still might be easier said than done, at least you know now that it can be done!
-By Gabriel Gutierrez