Reviewing Your Prices
First things first, before you ramp your prices up by 200%… Have you taken the time to see if raising your prices is the right thing to do? Your balance sheet might look healthier if you charged a little more, but could you ‘get away with it’?
What you have to do before you do anything else is take a look at your competitors. Let’s say you’re a tiny email marketing firm with three or four clients. Do a little research into similar businesses and find out how much they’re charging. Are you charging less? Then you should definitely consider putting your prices up. If you’re already charging more, you might want to think about your costs and whether you could cut those before charging any higher.
Another element to reviewing your prices is whether you have a completely flat structure or whether you charge more/less for different packages. There are dozens of different ways to price your work, which we take a look at later. But once you have your research done, the question is: do the benefits of changing your prices outweigh the negatives?
Changing Horses Mid-Stream: Good Idea?
It’s actually fairly simple to figure out whether changing your prices will be good for your business. Consider the following:
Your business can make more money. Always good!
You can change how clients view your business. Perhaps your expertise and client care would be better suited to a higher price.
If you offer the same price as your competitors, you will make more from each client, but may miss out on new clients who would be attracted because of your lower price.
If you change your prices for existing clients, you may lose some.
The trick is to identify what matters most to you. Do you want to be a cheaper alternative to your competitors? Or do you want to be more expensive than your competitors because you feel your work is of higher quality? Both approaches can work, so pick whichever you feel suits you best.
Basic Price Structures
But raising your prices doesn’t mean making everything more expensive for everyone. There are all sorts of ways to change how you price your services! Some are designed to make your business more money, others to earn more customers, and others to encourage customers to buy certain things. Let’s take a look at some basic price structures that businesses use.
1. Bundle Pricing
In bundle pricing, you offer products/services both separately and as a bundle. If the client buys all of the services together, they are cheaper than they would be individually. This encourages each client to buy more services that they might not otherwise have considered.
2. High/Low Pricing
Some products are cheaper than your competitors. Others are more expensive. You can use the cheaper products in your marketing material. This is similar to the ‘loss leader’ approach that supermarkets use, although you’re not obligated to actually work at a loss!
3. Premium ‘Decoy’ Pricing
In premium decoy pricing, a business sets the price of one product/service abnormally high. This makes all of their other prices look cheaper by comparison. You can justify the high price by offering guarantees, or pointing out that a product is UK manufactured; it helps to offer a reason! Plus, by contrast, your other products look cheaper. It’s a win-win.
4. Three-tier Pricing
Pricing structures with three tiers are very, very common for online businesses. In particular, most businesses that offer subscriptions use three tiers: bronze, silver and gold for example, or basic, ‘pro’ and premium. This gives customers extra choice as to what they want to buy; it also makes your cheap option look cheaper, and your premium option look more valuable.
5. Market Penetration Pricing
As the name suggests, market penetration pricing is where a business sets their prices low so as to gain market share. Eventually, they will raise their prices, but for now they set their sites on gaining customers rather than making maximum profit.
6. Package Pricing
This method is a little bit sneaky. When you bundle products together, it can be more difficult for customers to directly compare prices. You can offer a discount on a bundle- say, five for the price of four- but overall you’re making about as much as if you sold each product on its own. This can help avoid comparison between your business and a low-budget competitor.
So, again: decide what’s most important to you. More clients? More money? Outdoing your competitors? Whatever you need, there’s a pricing structure to help.
How To Handle Price Changes
Once you know the direction you’d like to go, the last thing to do is actually change your prices. But don’t just update your site, email your clients “You’re paying more now!” and leave it at that. Handle the process carefully and you’ll minimise the clients you lose, and make the change better for everyone.
Consider whether you’ll ask existing customers to pay more for your recurring services. On the one hand, you’ll slow down the transition between new and old prices if you don’t; you’ll also have to keep track of who’s paying what. On the other hand, you’ll miss out on extra earnings per client.
If you do ask existing clients to pay more, consider phasing in the change. Tell them that because they’re an existing customer, they can enjoy your old rates for an entire year while everyone else pays more! It’s all about making them feel special.
Otherwise, the key thing to remember is not to be afraid to increase your prices if you have to. Customers and clients are more loyal than you realise. Don’t fall over yourself to apologise; don’t beg your clients to stay with you. Explain simply that this is what you have to do in order to keep offering the same quality as you always have. And there you have it!