Photo Credit: Doug Wheller flickr.com/photos/doug88888/
This is a guest post by Eddy Hood. He helps entrepreneurs make $250,000 or more in their companies. You can read his blog and follow him on Twitter.
When I was 13, there was an electric guitar hidden under the couch. It was Christmas morning; I had been hoping for one and the parents delivered! That was a good surprise.
Fast forward 15 years and I’m laid off from a job due to the 2008 recession. I was working for a homebuilder at the time, and 50 out of 55 employees were cut in one fail swoop. That was a terrible surprise.
In this blog post, we’ll discuss how to increase your prices without surprising your customers and sending them into a tailspin.
Fill in the Potholes
You can’t increase your prices if your product or service stinks. Period. When I work with entrepreneurs on how to up their price, some are truly worried that customers will leave in full mass. As I dig a deeper, I find that their fear is actually caused by an inferior product or service.
Be Honest and Tell Them Why
I use a chat software for my websites called Zopim. I’ve been with them for a long time, and they recently made some upgrades which justified a price increase. I got an email from them stating that they added some features to improve my experience. They said that in order to offer the best service they could, they would be increasing prices. I didn’t care for any of the upgrades, but I appreciated their transparency so I stuck with them. They had done a good job for me up to that point, and I felt like they deserved a raise!
Being honest is the best policy when you need to upgrade prices. You may not retain all of your customers, but the increase should justify the fallout as penny-pinching customers jump ship.
Create Grandfather Pricing
If your customers are extremely price sensitive, grandfather them in as a last resort. Let them know that all new customers will experience a price increase and they get to keep their low VIP price.
This does two things:
It creates good will in the minds of your customers
It turns them into evangelists for your brand
Here’s Your Game Plan
If you need to increase your prices, here’s the play-by-play:
Spend the next 30 – 60 days fixing the problems with your current product or service.
Write a letter to your customers telling the truth. Let them know that you need to increase prices in order to give them the best services possible.
If you still feel like you’re going to get a lot of kick back, grandfather in the existing clients and charge all new clients the correct pricing.
Remember the electric guitar? As long as you make this a good surprise, they’ll be happy to give you a raise.
What do you do when you need to increase your prices?