Maybe you haven’t raised your rates in years. You’re priced below your competitors and you’ve kept it that way because you don’t want to alienate your customers or eliminate your pricing advantage with prospects – potentially “encouraging” them to consider their options. But your revenues are not aligned with your cost of doing business – and you must fix that or risk damaging the health of your business.
What do you do?
We’re sharing a few tactics that you can use in solving your dilemma.
- Increase profitability, not your number of clients.
It’s impossible to raise your rates and guarantee that you won’t lose clients. (For that matter, it’s impossible to keep your rates steady and guarantee that you won’t lose clients.) Raising your prices is a strategic decision that is likely to make your company much more profitable in the long run.
Raising prices has a beautiful effect on profitability. Every dollar of price increase is a full dollar of extra profit—there’s no extra expenses, no extra work for you. This price-raise dollar is therefore much more valuable than a dollar from selling an additional project, because THAT dollar brings with it additional work and expense.
The short term profit boost can be incredible. When your fees are higher, you need less clients to earn the same revenue. Most organizations come out ahead immediately.
- Test your ideas.
Because of the broad spectrum of factors that impact how your clients will respond to your changes, you really can’t predict what your clients’ response will be.
So don’t feel like you have to choose a new price and stick with it no matter what. Test it with only new clients – or – if you feel it would be more helpful – test your new pricing on existing clients. You can stage this in for the upcoming season and give parents plenty of warning.
Get plenty of feedback. If you learn that your initial price point test wasn’t well accepted, tweak it and give it another try with your test group before rolling it out to other groups.
If your feedback tells you that you’re treading on thin ice, pull your price change back and try it at another time.
Just be sure that your decisions on the success of your pricing changes are not based on the response of a single client. Make sure you “survey” enough clients to get a good cross section of your client base.
- Used a Staged or Phased Approach
Whichever group you begin with, you can take your time in pushing your price increases out in stages or phases. Group your clients and prospects and select the order in which you’d prefer price increases hit each group.
This gives you the ability to use the feedback from the early groups in presenting to the later groups. It may be that you start with new clients and reserve increasing your long-time clients until you have feedback from other groups – reducing the risk of rocking the boat with your current revenue streams.
It’s good to give 1-2 month’s notice of any increase. You may also offer full season or year payment to preserve that lower rate as long as possible.
- Never Apologize, Emphasize Value
While you may not be comfortable presenting new rates to existing clients, you never should be apologetic. If you apologize, you totally undermine any value you’ve established around the learning experience you’re providing to your students. Be sure to highlight the incredible results and progress attained with students.
Don’t give new clients any reason to doubt why your services are worth the cost. They probably won’t even know they are “new” or “increased” rates so don’t present them that way.
- Expand What You Offer
A great way to increase prices is to sell additional services. What about offering a new class that would be attractive to those who want to start competing? This wouldn’t require that you gain new clients but would be a class that a group of existing clients would add to the classes they’re already enrolled in.
This type expansion also enables you to bring in more money without increasing your cost of doing business.
You may also want to offer activities at times that your facility isn’t busy. Perhaps a morning class for Moms or for Moms and infants if your facility doesn’t get busy until after school dismisses.