A few days ago, I received a text message from my mobile phone network. It told me that they were putting their prices up, and that from next month, I’d have to pay more for my contract.
Needless to say I wasn’t happy. I shouldn’t have been bothered, because it’s only an increase of £1 a month; but I was.
Unfortunately, it’s human nature to react this way to what is essentially bad news. We don’t like paying for things, and when we’ve agreed to pay a certain amount each month for something, we don’t like it when we’re told all of a sudden that we’ve got to pay more.
But why did I get annoyed about an increase of £1? Is it because I’m incredibly tight and don’t like parting with my money? That might be true – it depends who you speak to on that one!
No – here’s the real reason why.
I wasn’t given a good enough reason why I should be paying more.
This is a challenge that all businesses face from time to time, and it’s especially true when services or products are provided on an ongoing payment or subscription basis. In financial services and technology, this could be anything from a subscription to a publication or e-learning, a software licence, or ongoing consultancy retainers.
Whatever your service, there’ll come a point where, for whatever reason, you have to put your prices up. You may be facing increased costs that you just can’t absorb. There may be future investment you need to make; or you may simply need to keep up with inflation.
You’ll need to tell your clients. But you know they’re not going to like it. So what do you do?
There are plenty of strategies you can adopt – and the internet is awash with people who can tell you how to sweeten the pill and not have your clients heading for the door.
Instead, I want to tell you about the messages you really shouldn’t give. Sometimes these are just as important as the things you should be telling clients – these mistakes are easy traps to fall into.
So, let’s start with the first one – which I believe is the most fundamental.
- Don’t rely on “because we can”
Yes, I’m sure you have terms in your contract or agreement that state you can increase your prices with a given amount of notice. But no-one is just going to say “OK, then” because you’re relying on your terms. We live in a commercial world, and just as you have the right to change what you charge, clients have the right to take their business elsewhere. So don’t treat this as a contractual matter.
2. Don’t be vague about why you’re charging more
Some businesses think it’s OK to give a general reason why they’re putting up their prices up and think that’s enough. But clients aren’t stupid and they’ll see through that if you ‘re not careful.
For example, the text I got said that this network provider was reviewing its prices so it can keep investing in its network to give its customers a great network experience.
And how exactly is my extra £1 a month going to make a difference to that?
Sorry, but that just sounds like excuses to me. What on earth is a great network experience? I have one of those now, because when I make a phone call or send a text, I get a signal. That’s all I want. How can this get any better and why should I be paying extra for the privilege?
See what I mean? If you’re too vague, then your clients will end up asking questions and wondering what you’re up to.
Now, if this provider had said that it was making investments in key geographical areas with the intention of increasing coverage and boosting speeds, I would have fully understood.
The bottom line is
If you’re not clear about why your prices are going up, clients will just feel like you’re doing it because you can – and no one likes to be charged more money at someone else’s expense.
A footnote on this point, though. Sometimes you may not have a great story to tell about your price rises. You may have to just do it to protect against rising overheads. Or you may have hit the need for a particular capital expenditure.
Again, the key here is honesty and clarity. If you really need to raise your rates, tell people and be clear.
There’s still a positive message to be got across in these circumstances. If the end result is that your business will be protected and clients will continue to have the same level of service without deterioration, then that’s actually a strong message too.
Just don’t tell people it’ll give them a great business experience in future or some nonsense like that!
3. Don’t be inflexible – try to give a little
Increasing prices is always an easier message to put across if you’re willing to give a little. Maybe a longer notice period before raising the price for example. Or alternatively, you could offer an upgrade or extra benefits to the product or service to give a bit of value back for the increase.
Anything you can do to soften the blow of having to pay more, even if it is a small gesture, will almost certainly be welcomed, and if you have the opportunity to do this, don’t pass it up. You’ll be surprised how far even the smallest concession can go towards helping clients to adjust to paying more.
Avoid these pitfalls and you could find the process of increasing your prices easier than it could otherwise be.
Now, I’m off to enjoy my great new network experience!