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Businesspersons of BHW, I have a question

Discussion in 'Business & Tax Advice' started by Reeshua, Jan 29, 2015.

  1. Reeshua

    Reeshua Power Member

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    I want to increase my services' prices but I have clients still currently subscribed to my old packages, priced at around $300. How do I go about telling them that I want and will increase my prices?

    For the record, the increase in price will come with an increase in the amount and quality of service provided. I'm planning to increase my prices to the market average ($1000). .

    I'm really eager to hear from the veterans here. All thoughts are welcome. Thanks!
     
  2. Trepanated

    Trepanated Supreme Member

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    You're going to lose a lot of your customers.

    What would you do if a company suddenly more than tripled the price of their service?
     
  3. Reeshua

    Reeshua Power Member

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    Yup, that's what I'm thinking too, but I'm increasing prices because I'm changing my target market to bigger companies that have bigger budgets as well as improving the services that I offer.

    What if I increase the prices incrementally?
     
  4. Trepanated

    Trepanated Supreme Member

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    It depends how important the revenue from your current customers is to your business. Can you afford to lose their business? If not, leave them alone for the moment.

    I would take a two-fold approach:

    Increase your pricing for new customers and work out over time what price point works best. In the process of doing that, you will acquire new customers with higher prices and better profit margins.

    At that point you are in a stronger, more diverse and more stable financial position to tackle the existing customers - and consequently will be more able to handle losing their custom.

    Once you have done that, then think about pricing for your current customers.

    The approach I would take is to speak to them and let them know about the new, improved services - but I would give them several options. Perhaps a smaller price increase to remain on their existing plan with the option to move to the 'bigger, better, faster' service, if that's what they want. Maybe even a loyalty discount on the new service.

    Personally, at that point I would have decided on a threshold price point, beneath which I would be prepared to lose those customers - but what that price is is your own decision.

    Another thing I would do at that point is work out which of the existing customers are the easiest to deal with and which ones cause me the most problems - and I would have a higher threshold price for the most troublesome and time-consuming customers. If you are going to lose some customers, it might as well be the most difficult ones.
     
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  5. Reeshua

    Reeshua Power Member

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    I might just go ahead with your advice.

    I will probably offer my existing clients an option to my new services but they can also stick with their current subscription. On second thought, I can also tell them that I will be increasing all prices but I'll give them a hefty discount if they allow me to use their business as a case study. The case study can further drive more business. What do you think?

    My biggest clients are either late-payers or really difficult ones. Guess I won't be letting them go just yet.
     
  6. RuthSam

    RuthSam Jr. VIP Jr. VIP Premium Member

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    You may launch new service with the increased price. The tell your current customers that they can stick with the current service pr upgrade to the new one/better one etc.

    So you avoid to lose existing customers and you can sign all new up on the "new service". That's what we do in such situations.
     
  7. BassTrackerBoats

    BassTrackerBoats Super Moderator Staff Member Moderator Jr. VIP

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    I'd have a real hard time increasing the price to my current clients... in fact, I've never done it with an online service that is a subscription based product.

    Off line I've done it but never with a subscription (membership) product.

    Part of the benefit of the subscription is upgrades without the increase in price. The business owner gets a "guaranteed" revenue stream and the client gets any upgrades for free.

    You may want to offer a different level of service, or a new product, to some of the new targets but I would not do that to a current client base if at all possible.
     
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  8. pxspro

    pxspro Newbie

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    If you are adding or improving your services, discontinue the the current package, and with your current customer continue to give them support as long as they keep paying the initial payment, give them the option to upgrade their current package to the $1000 package, with a possible discount.
     
  9. Reeshua

    Reeshua Power Member

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    Hey BTB,

    Am actually waiting for your opinion re this matter.hehe.

    What if the older version of the service will be phased out and will be replaced with the new (and subsequently more expensive) service? Should I keep the old version for the old client?
     
  10. Avid Learner

    Avid Learner Regular Member

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    To put this in context, are you making any profit off the $300 packages now? If not, then you have no choice, really.

    If so, from the customer's perspective, if they are happy with the service (amount and quality) now, you are just going to **ss most of them off.
    • You will lose those that are happy with where they are and don't want to move.
    • You risk losing those that might want to move, but find a > 330% increase too much to swallow.
    • You may have customers who would like to switch because they are happy now and find that much value in the offering, but now you have given them a reason to shop around, and have sullied your reputation by forcing a major change upon them without the option of staying where they were (leaving them to wonder what is going to happen a year or so down the road).

    As someone said above, if the shoe was on the other foot, how would you respond?

    Your best bet is to upsell them and leave them be for now. Then, if you insist on moving them, after some decent time has passed, announce you will be sun-setting the prior package and offer a time limited upgrade discount for their first year.
     
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    Last edited: Jan 29, 2015
  11. Falrish

    Falrish Regular Member

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    The best thing I would do in this situation is the following.
    You current subsciptions are on a contract. When the renewal of those contracts come up you offer them two options. The first option being the new rate and the second one being the old rate. Explain in great detail the differences between the two packages. If the new $1000 package is more than 3x more work for you (in their eyes) some will move over to the new package. Make sure they have the option though so they can make the choice and you do not loose the $300 client.
     
  12. serpmover2014

    serpmover2014 Regular Member

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    I definitely would NOT increase prices for current clients this way, it could backfire. When people are used to paying a certain price, they usually will not look forward to ANY type of increase. If your landlord increased your rent x 3 this month what would you do? And since Im sure your not offering your clients a place to live, if your price increase starts taking too much from their budget, you can bet that your subscription will be put on the chopping block and they would ditch it. I'd STRONGLY suggest that you increase the price for new clients only.
     
  13. Reeshua

    Reeshua Power Member

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    Great piece of advice. Will probably give them hints of changing improving my services and giving them a "free taste".
     
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  14. Reeshua

    Reeshua Power Member

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    Yup, pretty much what the others are saying. I would also like to mention that the reason why I would increase my prices isn't just because I am improving the service overall, but other costs such as tax and overhead cost would factor in as well.
     
  15. b1step-ahead

    b1step-ahead Power Member

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    Bumping up your price 10-15% a year is usually doable. Your going to loose clients maybe even half. Can you bring in new clients at your new price and keep your existing clients at your legacy price. If your vendors tripled their price tomorrow but didn't really explain why, what would you do?
     
  16. netmoney1

    netmoney1 Executive VIP

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    What others have said is right...raising the price more than 3x will cause a lot to leave, but let's not forget something - this is your business. You aren't obligated to deliver low priced service (unless you have a long term contract) - but let's just assume you don't and everything is month-to-month.

    I have no idea what your margins are for the $300 packages but I'm guessing not much...so let's just use pure revenue for this. Let's also assume you have 10 clients paying you $300 a month. Once you have 3 clients on your new $1k deals you have matched the revenue and have 30% of the amount of clients to manage. So, once you match your revenue approach all of your old clients and say something like, "SEO is constantly changing and in order for us to evolve we have to drastically enhance several areas. This is going to result in an increase to $1k/month" - even if 80% of your clients say no and you just retain a couple you are still managing half of what you were and making more money.

    Do do what is going to benefit YOU. Of course the existing clients will want to keep the same cheap pricing....but they don't own your business and they don't pay your bills. Don't be afraid to do what's best for YOU.
     
  17. Bileks

    Bileks BANNED BANNED

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    It all depends on what you are offering. If you want to increase the price and haven't done it since you started your business, it is something that can live! But be sure to check your competitors as well.