How To Successfully Raise Your Rates (Without Losing Customers)
Whether you’re a freelancer or a business owner selling membership services, there comes a point where raising rates is the right thing to do. The only question is, how do you do it without running off your customers?
5 Tips For Successfully Increasing Rates
Entrepreneurs and freelancers love talking about business, but bring up rates and everyone gets a bit squeamish. For some reason, the idea of discussing payment feels a little taboo. And if there’s one specific aspect that people get especially uncomfortable with, it’s the idea of raising rates.
“We all worry about the consequences of raising our rates,” entrepreneur Marla Tabaka writes. “We ask ourselves questions like, ‘Will my clients really believe I’m worth that much?’ We ruminate over the potential consequences, ‘Will I lose business? Will my clients get an ROI if my price tag is that high?’ Thoughts of a rate hike can lure the ugliest of our demons to the surface. So, instead of going through with it many consultants, coaches, publicists, and other service-based business owners suffer the financial and emotional consequences of under-charging.”
Don’t let this be you. Rate increases are not only fair, but they can also enhance the perception of the value you add to clients. The key is to introduce rate hikes in a planned and purposeful fashion. Here are a few suggestions:
You can’t just say you’re increasing your rate from $45 an hour to $70 an hour without providing some justification. (Well, you can, but you’ll lose most of your clients.)
The first step is to prove your value. If you have objective data or case studies to back up the value you’ve provided clients over the past few months or years, this is the time to use these resources.
Add A Feature Or Service
If you’re planning to substantially increase rates, it makes sense to add a new feature or extra service to prove to your clients/members that you’re actually giving them something in return for their increase.
“Perhaps your group is investing in new technology, real estate, upgrades or something else that will benefit members. In this case, it is important to communicate how they will be better off,” MembershipWorks points out. “For example, if the organization is moving to larger space, will more members be able to attend events or training sessions than before? Will you be able to charge lower prices for events because you aren’t renting private event space? Will members be able to use your facilities to hold their own events or meetings?”
Some customers are going to cancel regardless, but the rest need you to give them a reason to stick around. An explanation of value is all you need to pull these folks in.
Change How You Charge
Another option is to change the way in which you charge. This can give you a rate increase without a lot of pushback.
For example, let’s say you charge a client $35 per hour and they typically use you for 15 hours per week. Rather than increasing your rate to $45 per hour, you could switch to a weekly billing format where you charge $675 (an extra $150 per week).
Introduce Pricing Tiers
Customers like to know they have choices. Instead of mandating a rate increase, try introducing pricing tiers and letting your clients choose. This may include a basic subscription, mid-level subscription, and premium subscription. In order to retain some of the services they get now, they’ll have to pay for the mid-level or premium option – both of which require an increase in price. If they want to stay at the same price, they can sacrifice some features and select the basic subscription.
Be Mindful Of Wording
Be smart about your wording. Try adjusting how you talk about increases. Instead of saying you’re raising rates, say you’re changing your rates.
“Sure, you’re raising them, but most of us don’t love hearing we’re going to be paying more,” marketing communications expert Megy Karydes writes. “Simply changing the word helps communicate to your client that change is necessary to grow and this is the new rate.”
Raise Those Rates!
Raising rates isn’t evil or greedy – it’s necessary. (In fact, not raising rates actually means you’re falling behind due to annual inflation.) Just make sure you have a plan for how and when you increase your prices. This goes a long way toward smoothing over any friction that would otherwise emerge.