How to Raise Your Prices Without Losing Clients

“How to raise your prices without losing clients” is a question I think all of us have asked ourselves at one point, right? 

I know every time I get together with my entrepreneurial friends and colleagues, pricing always seems to come up in the conversation. When it’s my travel entrepreneur friends, the topic is charging service fees. Lately I’ve been struck by how it’s really the same conversation, it just has a little bit different spin on it!

Lower pricing doesn’t always mean more sales.

Let me explain:

Offering the lowest price is not a good marketing strategy and there are several reasons why. First of all, it cuts into your profits (duh, right?). If you have to continually offer lower prices than your competitors, the increased sales you’ll get could be worthless because you’re still earning less revenue. You have to be prepared to run the numbers on that.

Start by looking at what your revenue goals:

How many clients or customers do you need to make that goal at a low price point? How many do you need at the higher price point? How many do you realistically think your marketing is going to bring in? Will having a lower price point make up the difference?

Chances are if you are talking a very small difference – maybe you are coming in on the low end of the “industry average range” because you are newer to the market or are building your confidence to charge more – that maybe you might pick up a few extra clients that way and it may work to your benefit. But if you are way underpricing, you’ll have to make so many more sales that it may not be worth it in the long run.

How much more work will it be to attract all of those extra clients? And what does that do to your hourly average rate? YIKES!

Another question to consider is:

What if someone undercuts you? Large companies have a huge advantage when it comes to undercutting. They can afford to take a small loss if it means long-term gains. You can’t.

We see this all the time in the travel industry. While there are agents out there who will rebate some of their commissions to “buy” clients, they still can’t compete with giants like Costco travel who offers things that 99% of other agencies just can’t compete with.

So, how can you raise your prices without losing clients to cheaper options?

There are several ways you can set your prices higher and still make sales:

Raise the perceived value…

Write this down...price setting isn't based on actual cost, but rather on perceived value.

Perceived value is what your customers expect to pay for products and services such as yours. If you can grasp that perceived value is totally different from cost, this makes pricing high much easier.

For example:

In the 1990s, a CD sold for $14 new. Never mind that it’s a plastic disc with data imprinted on it whose actual material and production costs were a couple of dollars. People expected to pay $14, so record companies could charge it.

So, how do you use perceived value to your advantage? You do it by understanding what your market perceives as valuable. In other words, what qualities of your product or service would lead your customers to pay higher prices?

What are the benefits that make them say “WOW! I need that!” Remember that they don’t buy a “thing” – be it a product or a service – they are buying a solution!

Emphasize Uniqueness

Figure out what’s unique about your product or service. Does this help or provide value to your customers in a way your competitors do not?  When you are focused on uniqueness, your product or service doesn’t have to be the best at what it does, but rather the only product that uniquely meets your clients needs.

This is often a challenge for service based businesses. Consider things like increased access to you personally with a higher fee, bonus information or training, value adds with complimentary services.

Customize and Personalize

One area where it’s hard for big companies to compete is customization. People are generally willing to pay more for a product that’s designed especially for them to meet their individual needs. If you can find a way to customize your products or emphasize this customization as a key benefit, you can set prices higher.

For service professionals, can you offer your program or services specifically designed for one type of client? Whether it’s stay at home moms, just for dentists or for people who need to achieve this incredibly specific goal. When it is “just for me and everyone else will be people like me who I can relate to” it makes things much more compelling. You also stand out as an expert for that niche.

Aim Higher

This is a big one:

Maybe you’re targeting the wrong market. There is always a segment of the population that’s willing to pay a great deal for a high quality product. If you can sell to this segment, you’ll have no problem setting your prices high. However, in order to do this, you have to convince this market that your product or service is high-quality. Identify this higher-paying market and do some research to see what companies they buy from and why.

Remember that you are going to lose a certain percentage of people who aren’t willing to pay more. Just remember this…those are people who don’t value what you are offering. 

Let me ask you something:

Do you really want another client if that client isn’t going to value you, your expertise or what you offer? I didn’t think so. 

Setting prices low isn’t the only pricing tactic available for small business and, in fact, it might be the worst. Instead, look at your business and its products or services and find ways you can set raise your prices to make it more profitable for you and your market.

I'd love to know...when was the last time you raised your prices? Is it time for another price increase in your business? If so, what are the strategies you plan to use to set your new pricing?