At some point, you have to increase prices – whether it’s through imposing new fees or simply raising the cost of service. This can happen for a number of reasons. The cost of labor goes up, energy prices skyrocket or there are issues in the supply chain that impact how a key part of your operations function. These often lead to higher expenses that will need to be made up through increased revenue. But how can you maintain service excellence when a price increase is on your doorstep? Here are a few factors you should keep in mind:
Understand Your Client Segments
It won’t always make sense to raise prices for all clients. Some will be more sensitive to a change than others, and it’s worth your time to find out which ones will be turned off. RetailWire suggested taking a close look at which individuals would be more receptive to a rate increase for services or a product by looking at their past behavior and attitudes.
For instance, those who are more responsive to promotional deals – discounts, for instance – may turn out to be the ones most likely thrown by a jump in price or a new fee. Others who have consistently kept up business with you without requiring discounts may be the ones who will shoulder a greater portion of the expenses. In this way, you’ll do less damage, meaning you will potentially keep the majority of your clients by responding to their demonstrated traits.
Ensure Value is Added, and Nothing is Lost
In the simplest terms, recognize where you stand in your industry. Daniel Burrus, entrepreneur and author, wrote on LinkedIn that you must understand your value with respect to your competition, which will help inform your decision on how much of a price increase is feasible and acceptable by your clients.
Often, the lowest price doesn’t guarantee you’ll have a greater number of clients knocking down your door. Does your client experience help differentiate your company from your competitors, adding value to their relationship with you? Going further, Burrus explained you must increase value along with your prices. Instead of focusing on pricing during your interaction with clients, imparting knowledge about a particular product or service that your client wouldn’t otherwise know goes a long way to build a relationship and create trust.