Adjusting Your Rates
There comes a time in any business, where circumstances will arise that will warrant you making a change to what you’re charging your clients. A pricing change is a fairly common occurrence in any business. Just look at McDonald’s and their “dollar” menu (which is in many places actually over a dollar), or the recent trend in “everything for a dollar” stores suddenly charging prices that are definitely not a dollar. Another example would be the constant fluctuations in prices for computer parts. For a good long while, hard drive prices hit record highs due to earthquakes and tsunamis in the countries they are manufactured in, only now finding their way back down to prices more in line with what they were a few years ago.
Alterations in pricing are common amongst all kinds of businesses, and that includes yours. In some cases, this can be a good thing, and your clients will love you for it. In others, there’s a good chance they might not be so pleased. I’ll be looking at both of these scenarios with you today.
The easiest kind of rate change, is one that is to the benefit of your customer. Circumstances may have arisen that lower the cost of operating your business, and so you decide to pass some of that savings on to your clients. It might seem as though doing this is a bit counterproductive to one of the core tenants of this blog, which is to maximize your Personal Independent Earnings. I disagree. By finding ways to save money, and then in turn passing that savings on to your clients, you’re building better brand loyalty. Your clients will love that rather than pocket all of that savings yourself, you passed some of it back on to them. This generates a positive view of your business, and will not only help you build a strong relationship with your clients and keep them coming back to you for more, but also help generate positive word of mouth from your clients to their friends, coworkers, and acquaintances. Your existing client base talking up what a great business you are can result in you bringing even more clients into the fold. The final outcome? More money for you, and a bigger piece of PIE. Executing this kind of rate change is simple. When it comes time to invoice your clients, surprise them by giving them the new, lower rate, with a brief explanation as to why products or services they’ve been using are suddenly cheaper. The pleasant surprise, coupled with your openness and honesty about the changes, will help build that positive image you’re looking for.
But what about the other side of the coin? Unfortunately, circumstances can (and let’s be honest, probably will) arise that may necessitate you charging a higher cost for your products or services. Executing this kind of change requires a little bit more finesse, or you risk upsetting your client base, potentially driving them to a competitor, and even worse, giving your clients a negative view of you and your business, that they will in turn spread. This is not a good thing at all. So how do you avoid it? Like I said, with a little finesse. For starters, you’ll want to communicate to your clients the exact reason for the rate change. And it has to be a credible one. No, “I want to make more money” is not a credible reason. Perhaps items from a distributor (like the aforementioned hard drives) have gone up in price, to a degree that you have no choice but raise your prices or risk losing money. Perhaps supporting your existing services is beginning to cost more than your current operating budget allows for, and you have no means of streamlining. All of these are good reasons. The important thing is that you communicate your (valid) reasons to your client base openly, and honestly. Your clients will appreciate the honesty. Doubly so if you let them know of the incoming change in rates with plenty of notice. No surprises here. Make sure they know well ahead of time what’s going on to cause the change and why, so that when billing time comes you don’t have an inbox full of e-mails all filled with different variants of the question, “Why the $^$&#!&# are you charging me so much more?” Another great tip, is to put those excellent customer service skills of yours to work to try and soften the blow a little for your existing, loyal clients.
As an example on that last point, let’s say you’re required to raise prices 10% across the board. Rather than sticking your existing client base with the full brunt of that, why not grandfather them in with a lower increase, say, 5%, while charging new incoming clients the full 10%? You don’t even have to do this on a permanent basis. Even a temporary discount to help ease them into the new, higher rate will work wonders, showing your clients that you care about and appreciate them, by doing all you can to keep their existing rates as low as possible for as long as possible. To be honest, rather than getting angry about having to pay more than they did previously, your clients might actually like what you’re doing, despite the fact that you’re now charging them more money. And all because you offered them a slight discount that is in fact a higher rate than they were paying prior. Little tricks like this can help you execute an increase in your rates and fees, while mitigating some of the risk of angering (and worse, losing) your clients.
This is a very touchy subject, and one that even the most business savvy of us can easily make a huge mistake in. The best advice I can give, is to not make the decision to alter your rates hastily. Look at it from all perspectives, including that of your clients, and find a way to proceed that is ultimately beneficial for all parties. If you succeed, your road to maximizing your Personal Independent Earnings will have one fewer bump in it.