How to Raise Your Prices Without Losing Clients
We're all familiar with the fact that it costs five times more to acquire a new customer than it does to retain one. But when growing a small agency, you should always focus on new business.
Instead of spending your precious time meeting with potential customers and explaining how your agency can help, you can tackle the growth goal differently: raising your rates.
It's easy to think, "If I raise my prices, I'm bound to lose clients." This could be the case, but if done correctly, you'll have happy customers who understand the reason for your increase.
Today's article will show you how to raise your prices without turning off your existing customers.
Do Your Homework First
Unfortunately, you can't just wake up one day and decide to double your agency's rates. Technically, you can, but it's a surefire way to lose more clients than you'd like.
Instead, your first step should be scoping out the competition.
Run a quick search for the agencies in your area or any comparable nationally, and see if you can check out their prices.
Some agencies won't list their rates online, so you may need to pull a mystery shopper-type maneuver and ask questions to find what you're looking for.
The idea is to spend time researching the going rates for your agency's work. Chances are, they're much higher than what you're charging.
Speaking of which, when was the last time you raised your rates?
You may have bumped up here and there for specific projects, but your overall rate has stayed the same.
But is your agency the same as when you set that rate?
You may have added additional support by hiring more associates. Or you could spend time learning how to execute a user-friendly design. Why not charge for these upgrades?
Now, I'm not saying that your customers should eat these expenses, but by having more staff and better services, you're able to provide your customers with more. And if you're providing more, shouldn't your rates reflect that?
Have a Plan
You'll need to have a solid plan in place when it's time to raise your rates.
When will this change take place? How much notice will you give customers? How do you plan on telling them?
Before you let your customers know about the price increase, these issues must be considered.
A good rule of thumb is to announce the rate increase in the fall and let your clients know that it will take effect once the new year hits.
This gives them plenty of time to prepare financially, and it gives you the perfect opportunity to show your clients the value of your services.
As for telling your customers, it's always best to deliver the news in person. Sure, a letter/email/phone conversation can work, but you'll be much better received during a face-to-face meeting.
And if your client is not local, a (digital) face-to-face on Skype works well, too.
Show Value Long Before the Price Goes Up
Remember, you don't want to announce this price increase out of nowhere. Make it part of your plan to show your value long before this announcement or change occurs.
This part is usually tougher than the actual price increase conversation.
So how can you show your customer the value of your services?
The simple answer: explain your "why" for doing certain things and back it up with actual data whenever possible.
For example, suppose you're working with an e-commerce store that signed up to re-brand its virtual storefront. During your redesign stages, take the time to explain to your customer why you decided to do certain things. If you learned through experience that a red checkout button scares people off while a blue one converts more, let them know.
Remember, they're coming to you as the expert so show them what you know.
It's not enough to tell your customers your theory and say, "See how valuable I am?" You must back it up.
How can you do this?
Ask your client for tangible items, such as their Google Analytics report, before and after the redesign.
If your color theory was correct, your client should see an increase in sales. Once they know that you're also looking to increase their profits, they'll be more understanding when you increase your rates.
This works for services like marketing as well. Did your blog posts or SEO efforts drive more traffic to your customer's site? Let them know before mentioning a rate increase.
To do this effectively, you'll need to establish a baseline beforehand. This way, you can compare the before-and-after results. Take the time to do this before starting your next project.
Use an Artificial Discount for Current Clients
Now, this next tip may be too sales-y if you're not careful, so you'll want to roll this option out smoothly.
If you don't advertise your rates, you could use an artificial discount for your current customers to make your rate increase less drastic.
For example, during the fall months, let your current customers know that your rates have increased from $100 an hour to $150 per hour for new customers.
To show that you appreciate their loyalty and business, let them know that their new rate will only go up by $25, meaning they'll be charged $125 instead of $150.
The more considerable price increase for newer clients will offset the fact that you won't be increasing your current clients' rate by the full $50. Plus, if you need to drop this rate ($150 per hour) down to accommodate a new client, it will be pretty close since your current customers will already be at that adjusted rate ($125 per hour).
Don't Increase Too Much or Too Little
You'll need to figure out a sweet spot for your price increase during your planning stage. You don't want to go too high and risk losing all of your clients, but you don't want to go too low, or you'll be asking for more money within a few weeks.
Take time during your planning stages and assess what may drive up your costs in the future. Do you plan on hiring more staff to accommodate larger projects? Are you attending an industry-specific conference so you can help your customers' sites perform better?
Whatever the case, imagine what costs you might incur as you grow.
Since this can be hard to predict, a good rule of thumb is to stay at or below a 20% rate increase. Anything more than that may be out of your clients' budgets.
If raising your prices makes you feel as uneasy as cold calling, you may be going about things all wrong.
Take the time to scope out the competition, plan ahead to show your client the value in your services long before the rate increase announcement, and you'll be able to charge what you're worth.
If a few clients do fall off, that's okay. You're not looking to be the cheapest in town.