Are you still charging the same rates or selling products at the same prices that you were using in 2007? If so, you could be selling yourself short and missing out on thousands of dollars worth of hard-earned profits!
Unfortunately, setting—or upgrading— your rates can be a delicate situation. Many people put it off for fear of losing current clients or projects. Others feel that offering a bargain price will help them to nab a big job. The problem is that once you set your price, that’s where it stays until you work up the courage to ask for an increase.
It’s important that you review your prices and rates annually to be sure you’re in line with the industry standard and the value you provide. After all, the amount of money you spend on business expenses, home and lifestyle costs, and personal spending goes up annually—and when your expenses are increasing, why should your income fall behind?
It’s often easier to introduce regular or gradual increases than it is to hike your prices by one large amount—but if it’s been several years since you’ve evaluated your rates a large rate hike may be unavoidable. However, by doing your research and showing the ways in which you bring value to your clients, even a large rate hike can transpire smoothly.
Research your competitors
Before you advise your clients of your new and improved rates, it’s best to see what prices the market is currently supporting.
For instance, if you run a marketing business and you charge clients a fee of $700 for a particular product, check out at least three competitors to see what they charge for a similar package.
Be sure you evaluate other businesses that offer a similar level of skill and experience as your own, so you can create a fair comparison. A brand new supplier is still building their client base, so their rates are likely to be on the lower side. On the other hand, an established, high profile competitor may be able to leverage their reputation to inflate their rates above the industry standard.
As you evaluate competing businesses, you will get an idea of both the market spread and the value propositions of each firm. This is important information to have to guide you through small price increases as well as large rate hikes.
For example, if you are simply looking to keep up with inflation, you might look at three similarly qualified businesses who charge $650, $750, and $775 for your $700 service. Thus, you can see that at your current rate of $700, your rate is at the lower end of the scale, so you could easily introduce a 5-10% increase and still remain in line with the market.
If you are looking for a higher rate of return (good for you!), you would want to also evaluate the value propositions of your competition. A key factor in commanding a dramatically higher rate is being able to illustrate to clients that you deliver greater value than others. For example, if your competition bases their rate on their ability to generate search traffic, you may want to illustrate to your clients the ways in which the quality of your service brings them not just more search traffic, but also quantifiable sales increases.
Introduce your new rate
This is all a matter of good spin! There’s a positive way and a negative way to announce an increase—and the best way to pitch it is to highlight all the benefits of working with you.
Start by affirming, “I’ve always found my pricing to be quite competitive, particularly considering the level of skill, quality, and experience I offer to you. The value of my services is more than equal to my rates.”
Put all of the rate details in writing, including the date from which the new rate or prices apply, and use the correct language. You’re not introducing a “higher rate,” you’re introducing a “new rate.” Your prices are not “increasing,” they’re “moving in line with market conditions.” The more neutral the wording, the better.
Most importantly, use this as an opportunity to demonstrate all the benefits of using your products or services. Highlight your track record for proven results and the value you provide—for example, mention that your money-back guarantee is still in place and reiterate the fact that you’re on call 8:00 a.m.- 8:00 p.m. Sell your features and benefits so that it’s as plain as day that you’re well worth the money!
With any rate change, it’s inevitable at least one client will complain, “Your new rate is too high.” To respond to this type of complaint, back yourself up with facts, figures, and value statements.
Outline how long it’s been since you last changed your rates, and reference your underlying value proposition. “I’ve maintained the same rates for four years while consistently delivering timely consulting strategies that have increased your sales by 4%.”
Don’t be afraid to encourage clients to look around, either. If you’re proud of your work and you consistently deliver quality, your results should speak for themselves. That was the case with a consultant named Jasmine, who worked with a client for three years before broaching the prospect of a rate rise.
“She asked me to quote on a large project and when I gave her the price, she responded, ‘That’s much more than I was expecting to pay. Are you sure you can’t go any lower?’ I knew my price was competitive and I knew that she’d struggle to find another writer who could complete the project within her time frame, so I stood firm.”
Jasmine’s client declined to move forward with the project and sought other quotes. Three weeks later, she called Jasmine back with the news: “I’ve looked around, and you’re offering a good deal. The job is yours if you still want it!”
Know what you’re worth!
As Jasmine’s story illustrates, it’s important to price yourself fairly and not be swayed to undercut what you’re worth when dealing with pushy or aggressive clients. Be confident, and outline in detail the results you will achieve, to demonstrate that you’re worth your rate—and then, be sure you deliver the goods!© Copyright 2010 Ali Brown