It’s no secret that the economy is going through a bit of a rough patch right now. Everywhere you turn, it seems like one pundit or another is dispensing more gloomy market predictions. At the current juncture, it remains unclear just how hard the IT space will be hit, or whether it will be hit at all; some optimistic analysts are saying that the industry might remain relatively insulated from the worst of the current crisis. Still, it’s not entirely unlikely that some proprietors may be forced to make changes to ensure that they can stay afloat and ride out the turbulence.
Sooner or later, like it or not, most resellers will face down the tough prospect of raising prices on their product and service offerings. The news that a price hike is coming is something most customers don’t want to hear, although most understand that occasional increases are simply a part of the costs of doing business.
As with most things in life, customers’ negative reactions to a price increase can be softened significantly if you deliver the news with thoughtfulness and sensitivity. If you’ve made the tough decision to increase prices, use these tips to craft a strategy for breaking the news to your client base.
Shoot from the hip. If you’ve been forced to bump up your prices due to circumstances beyond your control, it might help to explain your situation to your customers in a straightforward letter. Research shows that it’s not really price hikes in and of themselves that buyers tend to resent; rather, it is price hikes that they perceive as unfair that really sparks their ire. If you feel that it’s appropriate and potentially helpful, come clean with your clients about the circumstances prompting your decision.
Roll out a staggered price increase. Instead of significantly raising your prices all at once, it may help to gradually ease into your new fee schedule over a period of several years. For major changes or radical revisions of the way you charge your customers, a period of several years may be ideal. Psychologists tell us that sudden, unexpected changes are often the most unwelcome, so try to provide your customers advance notice of your plans.
Reward loyal and high-value customers. Make room in your price increase plan for loyalty discounts, subscription programs, and other incentives that can help offset the impact for your most prized clients. Remember the old adage that holds that 80% of your business likely stems from 20% of your client base? You don’t want to alienate or unduly upset this core group. Assess the alternatives that might work and offer as many mitigating incentives as your price plan will allow.
Consider expanding your menu of pricing options. If you’re thinking about raising prices on some of your core offerings, why not create new pricing options for customers who might not want to fork up the higher prices? If you don’t have such a plan in place already, consider the possibility of offering “basic,” “deluxe,” and “premier” product and service bundles. That way, you’ll have offerings in place at many price points, and rather than losing a price-conscious client, you’ll have the more attractive option of offering them another service level instead.
Nobody relishes the idea of announcing a price increase, but even the most cost-conscious customer understands that markets shift and costs tend inevitably to trend upwards over time. As long as you develop a strategy ahead of time, you should be able to retain your core client base and avoid any lasting ill will.
Have you had an experience telling customers about an impending price increase? How did you break the news? How did your clients respond? Let us know in the comments.