Ten successful entrepreneurs from YEC explain how they go about breaking the news of price increases to their most loyal customers.
While the need to raise prices is usually good news for your growing business, it's not always music to your customer's ears--especially those critical early adopters and advocates who helped get your company off the ground. We asked 10 entrepreneurs from YEC how they go about breaking the news gently.
1. Be Honest I don't try to hide it. I explain to my customers upfront that I'm raising my prices. I tell them that I'm moving with the market and with my level of expertise, which has increased since they first hired me. I still try to offer some form of bulk discount so they can save more by hiring me multiple times. --Alexandra Levit, Inspiration at Work
2. Thank Your Customers The first thing I do when I increase prices is say thank you to customers. I sincerely express my appreciation for the risk they took on me, and then I'm transparent with them about why I need to raise prices. I make sure they understand why we're asking for more money and why our product is worth more now than when they started. It doesn't always work, but most customers tend to be understanding. --Sarah Schupp, UniversityParent
3. Explain Your Costs Sometimes you need to raise your prices. Explain to your customers why you are raising your prices and how you are using the additional funds they will be paying each month. If your own expenses are going up, then explain to your customers why that is happening. If you are spending more money on your product, then explain to your customers how the additional features will benefit them. --Chuck Cohn, Varsity Tutors
4. Add Features When you add a value feature to your tool, it gives you a reason to review pricing with your clients. Early customers will understand that they joined you at the beginning stages of your product and that with the product's improvement and growing feature set, the pricing may change. A new feature is a good reason to revisit deal terms. --Doreen Bloch, Poshly Inc.
5. Give a Lower-Priced Option Let customers focus on value by giving them a second, lesser-priced option. Then there's a decision to be made, which focuses on the value that the product sets rather than the price increase. This is especially helpful if the lower plan is a little less expensive than what the customer currently pays. --Trevor Sumner, LocalVox
6. Over-Deliver First Be sure you can demonstrate that the value you provide is increasing more than the price. This way, customers know that they're still getting a good deal. As a rule of thumb, over-deliver and really impress your customers for at least 100 days before communicating a price increase. --Matt Ehrlichman, Porch
7. Add More Value It's important to add more value to sweeten the deal. Your product should always be improving, but it's simply counterintuitive for somebody to pay more for the same thing they got for less before. Justify the price increase by adding features or providing some other type of added value. --Andy Karuza, Brandbuddee
8. Raise Prices for Reasons Other Than Profitability Tactics exist for raising prices. However, it's essential that customers don't think that you're doing so just because you want a better profit margin. Even the smallest hint of that could be damaging. --Henry Balanon, Protean Payment
9. Explain But Don't Apologize As your business develops, your product should be worth more. Briefly explain how the higher price is going to allow you to better serve them. Then move on. If you've proven your worth, then they won't walk away. --Mary Ellen Slayter, Reputation Capital
10. Inform Your Customers Give customers a chance to buy a higher-tier plan before prices go up. You'll get a nice bump in revenue from these early upgrades, and your user base will be happy that they got a chance to buy before the price increase. --Jared Brown, Hubstaff
The YOUNG ENTREPRENEUR COUNCIL (YEC) is an invite-only organization comprised of the world's most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses. @YEC @YEC