It’s Time To Increase Your Pricing

Written by Tammy Durden

How do you know when it’s time to increase your pricing? There are many ways to determine this but one of the best ways is through competitive research. Viewing others in the same industry and their websites (if they have pricing) can offer greatly needed insight on pricing strategies for you. As you review your competitors and consider strategies for the year you may decide it’s time to increase your pricing.

I would like to discuss how you can increase your pricing in your service-based business. It is a process, like everything in your business. So, I’ve included the steps to help you do this.

The first step in considering raising your prices is to analyze where you are now. Review all of your services and how much each is. You may also have a few tiers of types of programs under each service.

EXAMPLE: You may offer social media management. On your website you probably have 2 – 3 package offerings just for this particular service. It would include a smaller or introductory package, a mid-size package, and, of course, the largest package.

Regardless of what you call these programs or packages, you must consider each one.

Next, you should conduct competitive research. I recommend doing this at least every six months regardless of your pricing so you can be sure to keep up with your industry and what is being offered. For our purposes, however, we want to consider the type of service offerings your competitors are listing.

You do not want to copy their pricing strategy you simply want to compare where your pricing falls versus their pricing. You should view three competitors at a minimum and take notes in your digital notebook (OneNote is what I use). I even take screenshots to help me remember certain items I am looking at on their website.

“Investigate your market competition to determine if your pricing strategy is correct. If the average price for similar goods or services is significantly higher, you may be missing out on revenue.”

INDEED

Keep in mind that you want your clients to focus on the value you provide and not be focused on quantity output. You need to educate your clients when informing them of changes. Value is worth far more and the right clients will see your value.

The thing you must do is determine if a change to your pricing is needed. If I am going to change my pricing it most often happens at the end of the year for the next year’s new clients. You are the only one who can determine IF you want to change it and if you will increase your prices.

You may decide if best to increase the pricing of one service but not another. Although you have done competitive analysis it is still your business and you set the prices, nobody else. So be happy with the changes you make.

I have found, most often, that many of my service-based clients do not charge nearly enough. It is often one of the places we begin when evaluating how to help them grow their business.

If your rates are extremely low and need adjusting, I do not recommend increasing it an extreme amount on your existing clients.

I always included a clause on my contracts indicating that I had the right to increase my rates by 10% each year. I also added that I did not usually do this but I wanted the right to do so.

If you are making a huge increase in rates save that for the incoming new clients (once it is in effect). Do not increase a significant amount for existing clients. You do not want all of your current clients jumping ship.

Existing clients should be brought up to speed (on your real value) gradually.

EXAMPLE: Keep the Social Media Manager example, let’s say you are only charging $150 per month for your lowest package. After competitive research, you realize you should be charging closer to $300 per month. You cannot suddenly double your pricing on current clients. I recommend doing it in quarters or thirds.

Example continued: You may increase by $50 a month for the upcoming year. You let them know, however, that you have been extremely underpriced and that you will gradually bring them up over the year or two. Then the next increase is $50 (whether it be 6 months in or the next quarter). It is best to plan it out fully and keep your clients in the loop so they feel empowered by it as well. Of course, the final increase of $50 would be your final increase (a year or two later, however, you lay it out for them). This does not mean you will not increase it again this is simply the strategy of bringing a client up to the right pricing value – your true value.

Planning Your Year in 2024

When you change your pricing, the next step is to prepare your clients in advance of the effective time. My recommendation is to send your clients a notification at least a month in advance. This usually is enough time and within the contract for them to decide if they will continue services with you or if they will look for a new provider.

Don’t panic, I only mention this because as service providers most contracts are month to month with a client or yourself giving a month’s notification of changes forthcoming. I have found, however, that the majority of clients will continue with you as their provider as long the increase is reasonable.

When you notify your clients you are also educating them. You do not necessarily have justify increases but you will want to let them know if you are continuing to up your skills so you provide the best services and stay up to date in the industry. You may also want to inform them if your own costs have significantly increased. Be careful how you word this as you don’t want to sound as if you are making excuses only that you are keeping them informed. They should walk away from the notification understanding not looking for someone else.

One exception I used in raising client rates is for brand new clients who may have started in the last quarter of the year. It doesn’t seem fair to raise pricing on what they just signed up for so I always included (in my contracts where I noted about the 10%) that it did not include any clients who sign up in the last quarter of the year. If you find, after doing competitive and market research, that your rates are significantly lower than the market and/or competitors you can revisit increasing rates for the last quarter new clients after six months or after the first six months of the new year.

Start New Pricing at a significant point in time. I find doing the analysis and review is best in the last quarter of the year, usually in October. This allows me time to give notifications to my existing clients by the end of November. Most service-based providers have packages or charge by the hour. If you have packages you want to allow your current clients 30 days’ notice so they have time to choose to continue with your services or change in the new year.

Do not stress, because even if a client chooses to go elsewhere this opens you up to receive those higher earning clients that will be the loyal longevity clients we all desire. Giving you the freedom to work higher paying clients who understand your value.

Once you decide, stick with it and also change it right away on your website if you list your packages online.

The final step is to be confident and be clear in the change(s) you make. Be confident in your worth and the value you provide to your existing clients. Being confident and clear goes a long way in ‘selling’ yourself and your rates to those who desperately need your help.

As you are confident and clear you will not only sell the increase to your clients but you will also believe you deserve it (if you had any doubt).

Never be afraid to be bold in it. You’ve earned the right!

with love from Tammy Durden of Fearless Business Boss

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