29 Apr How to Raise Prices Without Upsetting Your Existing Customers
Raising prices is easy with new customers, but a lot trickier with old customers. Let’s face it, customers who have been with you for a while don’t like change, and they certainly don’t like a change in their bank accounts. So, you have to try and find ways to raise your prices without all of your loyal customers walking away.
In this guide, we’ve put together five different strategies for you to consider. Remember that your primary goal is to gain new customers, retain as many old customers as you can, and make the most money for your company. It also goes without saying that you’d want to ensure that your billing and payment systems should be able to handle all these changes without breaking into a large IT project.
- Focus on New Customers
Start with your new customers, the people who don’t know your company from Eve. New customers don’t have a point of reference for price comparisons, so they won’t look at what you are charging and compare it to what they paid last month (or last year) for your service.Older customers will complain though, and the longer they have subscribed to your company, the more they will complain. So you have to ease them into the change slowly, rather than throwing a price hike at them all at once.
Why? Because they will compare the new cost with whatever costs they have paid in the past. If, for example, you are changing annual fees from $175 to $320, but your loyal customers signed up when a deal was offered for $99, the jump from $99 to $320 is a lot harder to handle compared to $175.
Think of it as a relationship; do not expose all of your flaws on the first date, slowly share them over the course of a year or two. You might also consider easing the blow by giving bonus items when you start changing the price. Sure, the monthly rates are going up by 10%, but you are giving them a free eBook, two free months of subscription, or something else worthwhile.
- Make Sure Your Timing Is Right
Make sure the timing is right. You don’t want to tell your customers that you are charging more right after they complained about your service. This is a surefire way to lose a customer. The price increase might be minimal, just another $1 or $2 per month, but they will direct all of their anger over something else toward the news and project it on your cost increase. Wait until the timing is right, wait until they are happy with your service, they have recently said something positive about your company, or they have made a big purchase.
- Add New Features To Show An Increase in Product Value
Add new features at the same time you are asking for more money, because this will show your customers why you are worth more. If your company has not changed, customers will have a hard time swallowing a change in price. Tell them why you are bigger, better, stronger, and why you are worth more money.Alternatively, group new functionality into logical modules and then offer these modules to your existing customers. If you were already planning on giving your customers a new feature, wait and release it with the new membership. But release it as an “add-on”, a new thing they can “add” to their existing membership. This is a sneaky way to increase prices without the loyal customers feeling betrayed.Instead, they get to feel like they are in control, they are the ones opting to pay more for a new thing. Your customers are the head, and your company is the neck, turning the head any way it wants.
- Split Products Into Multiple Editions
Split your products into multiple editions. Try offering a three-tiered price pricing structure for three memberships, rather than one. This will make the increased costs seem reasonable and reduce the anger from your customers.Much the same as the examples above, if you want to change your subscription price to $50 per month, but right now it is only $30, then give your customers three options: $40, $50, and $60. Each of these should come with a different set of features. This way, your customer feels like they are in control once again. They are the ones who are looking at the three options, and picking the one they want. Most of the time, they will pick the middle tier because it is the one that has the most options. The lower tier isn’t cool enough and the upper tier might not be worth the money in their eyes. Either way, you wanted them to pay $50, and now they are paying $50.
- Be Prepared For The Backlash
Finally, be prepared for some backlash. You will not make everyone happy. There is nothing you can do about that. Instead, figure out how many customers your company can afford to lose, and use these tips to try and avoid losing any more. You will lose customers, but it is not the end of the world. You will find someone else, lots of someone’s, if the strategies work well. New customers can more than make up for the loss of an old one.
Overall, your goal is to reduce the backlash from existing customers, while targeting a higher number of new customers to try and balance everything out. Make sure you set realistic targets for how many customers you think are going to leave as a result of this price change and remember that even though you may lose customers, it was still a job well done for your organization if you can keep that balance.