Planning to Raise Your Prices? Follow These Tips to Avoid Losing Customers!
Running a trade business can be tough…
Fierce competition coupled with rising labour and materials costs means trade business owners are earning less profits than ever before… that’s enough to make anyone stress out!
So what’s the solution?
Well… The most logical thing to do to combat increases in expenses (and ensure you’re still earning a steady profit) is to raise the prices of your services.
However, we understand that this is easier said than done.
Whilst slight increases in pricing can reap massive benefits for trade businesses, most shy away from doing so in fear that customers will baulk at price increases and turn to your competitors.
The fear is justified but long-term, it can hold your business back from generating increased profits. AND at the end of the day, if a customer isn’t willing to pay you what you deserve, let them go to your competitors! It’s customers like these that you might end up struggling to collect payment from them in the end anyway.
If you’re planning on increasing your prices (which we highly recommend) follow these simple tips to combat the negative side-effects of price increases on your trade business:
- Plan Increases In Advance
Determine at the beginning of each financial year when you will increase your prices and by how much, based off past expenses and future forecasting.
Customers may have a difficult time accepting your increased prices in the first instance… If you were to increase them at the beginning of the year and then realise you need to increase them again 4 months later with no warning, then customers will not only have gone through random price increases once, but now twice!
- Honesty Is The Best Policy
When we say this we don’t mean you should start screaming from the rooftops about your price increases. BUT, if a customer asks, don’t avoid the question. Answer honestly.
Say something like, “Yes Mrs. Jones, our prices have increased. This is due to unavoidable increases in labour and material expenses and we thank you for your ongoing customership at this time.”
- Add Value
Your customers are less likely to protest price increases if you’re able to add value or some sort of ‘freebie’.
To add value, commit to an ‘it’s the little things’ approach to customer service. For example, our professional tradesmen do this by using clean boots and Tidy Tradie mats when performing work. Customers see they are taking extra care to be neat and tidy, and therefore trust that our tradies know what they are doing and can justify pricing.
Another thing our tradies do, is leave behind free plumbing information booklets and ‘drip’ shaped stress balls. Not only does the customer feel valued as they have received a small gift, but the information booklet also increases our credibility.
- Increase Slowly…
You’ve probably heard of this age-old anecdote before… If you put a lobster in a boiling pot of water, it’s going to scramble to get out of the pot. BUT if you put it in a cold pot of water and slowly bring it to heat, it’s not going to notice.
This somewhat applies to this situation. If there is a DRASTIC change in your pricing, customers will notice straight away and will be more likely to protest. On the other hand, steadily increasing your prices until you reach your desired price range will provide customers with warning and they will become accustomed to it.
For example, your hourly rate is $40 an hour but you want to increase it to $50. Increase your rate by $1-2 a month until you reach $50!
- Offer Occasional Discounts
Price-conscious customers are not fond of price hikes, and will tell you so. In order to retain these type of customers, strategically offer discounts of (example) $50. You will still retain these customers whilst still supporting your increased pricing for future jobs you complete with them.
All in all, you can’t please everyone. And as I mentioned, it’s the customers that have adverse reactions to your pricing and turn to your competitors that you probably don’t want as customers anyway! To combat the negative effects of price increases, prepare for backlash using the above tips and ensure your team is ready to respond to concerns in a friendly and professional manner.
Interested in learning more about your trade business pricing and calculating your hourly rate? Our next round of ‘The Next Level Tradie’ live events kicks off in just TWO WEEKS! On the day, we will be discussing EXACTLY how to price for profit in your trade business. CLICK HERE to grab a FREE ticket to our Brisbane, Melbourne, Sydney, Perth, or Adelaide event.