How to Handle Price Increases with Your Customers

Dallas Maids - How to Handle Price Increases with Your Customers

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How to handle price increases with your long-standing customers

by Susan Stageman of NLP Training Concepts

There comes a time in every business when cost increases necessitates the increase in fees to customers and clients. I’ve been a long-term customer for many local businesses over the years. I’ve experiences price increases in a variety of ways.

  • The price for service or product increases without any notice. This often happens when the business is offering a commodity or tangible product. Sometimes it increases when a contract runs out without notice.
  • A notice (email or worse, text) is sent out to all customers about a price increase. This is impersonal at best. If the business has a huge practice or customer base, long-term customers are not necessarily distinguished from the customer base.
  • A personal call (not always convenient; very time consuming) to many long-term, loyal customers.
  • Tell regular, long-term clients that their fees are increasing but not at the level of new customer fees.
  • Something that includes some of or all of these.

If you have a personal and/or local business where you know most of your customers by name or face, handling price increases can be delicate if you value your customers and want to retain them.

I recently spoke with a client who had done business with a firm for 20 years, seeing them 2 times a month during that time. The firm sent a blanket email informing clients of a 30% increase in fees. Comment: It seems that when the perception of the general economy improves, businesses take advantage of raising fees. Of course, it seems a lot of businesses do this so it becomes a zero sum game. To cover the cost of business, businesses raise prices. It is like a dog chasing its tail.

The Client’s Reaction

So, as reported by my client, here is what transpired on his next visit. He brought up the fact to his provider about the cost increase. He remarked that it was quite an increase; that he might have to go to once a month.

Here was the reply. “Quite honestly, there are plenty of people that will fill that spot. I’ve been giving too much of my business away with discounts I’ve been giving to my clients, according to my CPA. My rent has gone up, my insurance has gone up. If that is what you have to do…..”

WOW! My client was a little taken back by the reply. It came across as a little defensive. He wasn’t’ expecting, after 20 years of being a referring client, to be told that he can ‘take a hike.” (My interpretation) He left after the appointment feeling a little betrayed (the word he used). When my client examined his feelings he wondered what this was about. This is what, after discussing it, he concluded:

He was willing to pay the increase because he valued what this person did for him all these years and he was willing to continue that relationship. What my client really wanted to know is that HE WAS A VALUED CLIENT AND ALTHOUGH HE HAS THE CHOICE OF LEAVING, BUT THAT HE WOULD BE MISSED AND THAT HIS LOYALITY OVER THE YEARS WAS IMPORTANT. However, he didn’t get that. What the message he got, ‘too bad, I can replace you as quickly as you leave.’

People often don’t need to know why someone raised the price. All they need to know was that the business value us as clients and they appreciate our loyalty. There are elegant ways to bring up price increases with businesses – ways the will not elicit defensiveness.

How to Bring Up Price Increases with Customers

  1. Tell the client or customer they are valued and that you value their loyalty over the years.
  2. Tell them that the increase was necessary if they ask. Why you raised prices is no one’s business except your own.
  3. Encourage them to continue as a client as you will continue to provide outstanding service.
  4. Offer value. Explain what they will get (if anything) in addition to what they have now as a result of staying with you. One time a business which I frequent raised their prices. What they did is they handed out a card to each customer as they came in for service that said, We are finding we have to increase our fees due to the increased cost of doing business. Our new fees are this for these services. Here are the new and improved service and products you will be getting for this price increase. They listed the improved service and products. They were small improvements but it added value to encourage me to stay.
  5. Make certain that your customers always know the value of doing business with you. When you have to raise prices they are likely to remain with you. Many services are becoming commodities so customer loyality is an easy marketing strategy.

Customers are the most important part of your business. Treat them with value like you do money. They are the reason you exist. Let them know you are important.

I discussed this with my business partner, David McElroy (a business consultant for 30 years), who made 2 comments: Never let your CPA dictate such business decisions. He does not interface with your clients every day. Never sent blanket, impersonal emails about price increases.

How have you handled price increases over the years?