Article

Nick Brown
Nick Brown 15 July 2021

How to Make Clients Agree With Your Service Cost Increase

Increasing service costs is one of those times when business owners need to make difficult decisions in order to benefit and expand their company. Yet, increasing your service costs isn’t always necessary, and you have to make sure that it would benefit your company. Increasing service costs unnecessarily could be irrevocably damaging and only cause your clients to turn away from your services.

In every business, there comes a time when you must increase your prices. It’s one of the scariest things your business can do, because of possible client dissatisfaction. Especially for businesses using SaaS models, no one wants to lose their loyal customers or subscribers—your business depends on them. However, in some cases, not increasing prices can be just as fatal.

Do you Need a Service Cost Increase?

So, why increase at all? What must be understood is that no customer will agree with an unnecessary price increase. This decision requires dedicated attention and you need to ask very specific questions.

  1. Increase in clients

Is your business beginning to have more attention than before? If so, this could be the perfect moment to expand your services for those new clients. The more subscribers you have, the more you have to provide.

  1. Cheapness anxiety

Are you starting to wonder if your services are cheaper than other brands? Maybe some customers have commented on your prices? Being the cheapest brand on the market isn’t always a good thing and your prices could start becoming judged. 

  1. Misaligned with clients

Are you beginning to feel like your company’s energy is on a different wavelength to your clients? Perhaps you need to conduct a keyword gap analysis, or it could be that you aren’t prioritizing the things they are valuing through your marketing. If you’re beginning to feel a gap, then a service cost increase might be the solution.

  1. Client reviews

Every business has to contend with client critiques. If you’re at a point in your business where critiques are more often than good reviews, especially through your small business phone system features, then a price increase might only anger your clients.

  1. Revenue

Another reason might simply be that you need the revenue. This is a completely valid and important reason. If you have plans of expansion, increasing service costs is a vital and often unavoidable step. This graph shows the importance of increasing revenue.

Image source

If you’ve found a reasonable position for a price increase, then you’re ready for the next steps to produce a successful business and how this can be achieved through price increases.

The Process

If a service cost increase hasn’t been planned thoroughly before it begins, it is doomed to fail. 

Image source

As this plan shows, customer/market and even keyword research needs to be at the very top of your list. If you don’t understand your customers and what they want from your services, how are you going to keep them happy? 

This is a basic plan sectioned into weeks, but it will not work for all business structures. You might need longer to plan, communicate, or launch.

  1. Customer/Market Research

A good place to start with your research is to look back at your previous price increases.

  • What happened when you increased?

  • How many buyers/subscribers did you lose?

  • Did lifetime value rise and customer acquisition decrease?

Then, you need to compare your company to your competitors.

  • Will a price increase move you into a new tier?

  • Are you trying to get into the high-end market?

  • Are you the value option?

Next, you need to understand your current customers. The best way to do this is to make a survey that clients can voluntarily fill in. This will help you understand what prices they prefer to pay, their perceived value of your services, and whether they expect to stay loyal. 

Knowing your customers is just as important as the QA process for your product. At the end of the day, you need to know whether your customers value you enough to accept a price change.

This is an example of a possible pricing survey for customers.

Image source

  1. Communication Plan

Your initial research will help you develop a strategy with all the different parts of your business. To achieve this, you need unified support. A pricing change affects every part of your business, so it is vital to get it right. Here is a list of some methods of price increases you can use:

  • Increase restrictions on a free trial version - This helps move customers towards the paid plan.

  • Shift benefits - Better for newer clients. If their cheaper version has less benefits they might be more likely to shift their plan.

  • Create a new feature - Premium tiers have a proven success rate.

  • Premium packages - go up in price and value.

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  • Reduce or remove discounts - If there’s a gap between your list prices, removing discounts can passively increase prices.

  • Grandfathering - Grandfathered customers have limited access to new features. This, however, does have a limited shelf life. 

  • Anchoring - Allow your customer to have a choice of plans. The anchor is the past price, but they can now see the other prices with added benefits. 

Example of anchoring.

Image source

  • Offer a choice - Offering your customers a choice on whether to go with the new plan with extra benefits or stay where they are, gives the value of your services to the customer. 

All of these plans require communication with your customers. Clear communication is the foundation for a good business-client relationship.

  1. Launch Pricing

Before the launch, you need to have given your customers advance notice of the changes and an explanation for them. Once you’ve launched, the best thing you can do is gain feedback. 

If you give as much attention to explaining and communicating as you do to your functional testing, then client complaints should not be overwhelming. However, you should still expect some. If you’ve failed to consider a customer segment or have misjudged your numbers then you need to receive feedback as quickly as possible and plan a solution. 

After the launch and the initial feedback, even if you were successful, you need to continue reviewing every couple of months to maintain a good customer satisfaction score (CSAT)

Also, make sure to keep an eye on your SEO competition and how your pricing change has affected them. Social media and customer reaction analysis is an important part of this.

Keeping your Customers Happy

So, you’ve decided, without a doubt, that you have a good reason for increasing your service costs. You've done your research, created a plan, communicated this plan and launched it. However, even through all of this, there is no saying that your customers will not be upset. You need to keep in mind the best ways to deliver great customer experience.

How can you keep your customers happy?

  1. Be Transparent and Clear

One of the worst things that could happen is a customer misunderstanding what you’re changing or how you’re doing it. You need to be transparent and clear about what the changes of your testing methodologies and pricing plans are going to be and what this means for them.

  1. Make Changes Easy

The best way to make an easy change is to give your customers a limited time offer to receive the new product at the current price. It’s a great way to gain customer loyalty and respect, and helps retain your current customers. 

  1. Update Your Marketing

Your marketing now needs to reflect your new changes. Customers cannot become confused between the old prices and benefits and the new ones.  

  1. Contact Customers Directly

When customers are contacted directly through your business phone app features, a relationship of trust and loyalty is formed. If you contact them directly, you limit the possibility for confusion and misinformation.  

  1. Offer Direct Communication

For many customers, being able to contact staff is very important. They can voice their concerns and have questions answered directly. This also helps to build business-client relationships. 

  1. Focus on the Positive

The price is going up, that’s a negative, but you’re changing your price so that your customers can get better value for their money with extra benefits and privileges. This is what you need to focus on. Your services are for your customers. 

  1. Thank your Customers

Customers need to be shown that their loyalty is appreciated. It has been proven for many business owners that showing gratitude helps business. Not all clients will understand your reasoning and will choose to leave. If they do, be appreciative of the relationship you have had. It is not impossible that someday they might return. 

Service Cost Increase - Customer First

Customers are the most important part of your business and they deserve to be treated as such. As long as you are transparent and clear to them, provide them with options, explain the benefits of your services, and appreciate the relationship you have formed with them, a service cost increase can easily be the next step in the expansion of your business. 

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