Tweet

Raising Service Prices in a Recession

Written by: Merra Lee Moffitt

Article Overview: You may think it impossible, but some businesses are raising their prices during this recession. How about you? Are there specific areas you can target? How about specific products? One thing for sure, if you give up without trying, your prices will not get raised this year.

Raising Service Prices in a Recession

So you thought you’d be generous to your clients. Or maybe you were just too busy last year to do the work necessary to raise prices. Now with costs going up and sales going down, you just want to kick yourself for missing the opportunity. Don’t despair. It is possible to raise your prices even in this economy.

Here are a few ways to raise service prices in a recession.

Raise your ‘grandfathered’ prices. We each have clients who’ve been charged the lowest possible prices because they’ve been long time clients. Their rates can sometimes be half the rate of our new clients. We love these clients and want to keep them. You can raise these prices and they may still be a sizeable discount to your new customer pricing. Just tell them that their prices have been so much lower than your new clients that a small increase now is still significantly less than what you charge new clients.

Raise but give a returning client discount. One way to make a price increase more palatable is to raise the prices for the NEW customers only. You can tell your clients that you are raising prices, but that their cost will remain the same for 6 months or a year. That way, they’ll feel like they got something extra, but will have been forewarned of an upcoming increase.

Don’t rescind those gas charges just yet. It may seem silly to keep your recently imposed gas surcharge when gas prices have fallen 60%, but think it through. You probably should drop the charge for now but be ready to put it back in place when gas goes back over $3.00 a gallon, which may be sooner than you think. By the way, if you missed the boat during the last gas price run-up, get ready because you’ll have another chance, gas will go back up sooner than you think. You can gain brownie points by telling clients you’ve temporarily suspended your gas surcharge, which makes you a hero now but forewarns them the charges will be back sometime in the future. Which by the way is the hardest part of installing a gas surcharge - how to tell your clients. By the way, according to Angie’s List 91 percent of service companies raised prices or thought about raising prices in 2007 as gas prices spiked. So don’t get behind the ball next time.

Travel time billing. In a similar vein, if you have not been billing for travel time, now is a good time to institute it. You may decide to institute this charge when clients are greater than 1/2 hour away or more than 20 miles, for example. With online maps and GPS’s so popular, it’s easy to tell how far clients are before you arrive, so you can tell them upfront. With costs going up, you can add ½ price for travel time, or bill for travel time one way.

You haven’t raised prices for several years. If it has been three years or more, use that as your rationale. You can be self-deprecating as you do it. Say, “I missed my opportunity to raise prices for the last 3 years, but with costs going so high, I really need to put in a minimal increase.”

Add a little extra. You price is supported by the value your customers perceive. If you add a new feature that people have been asking for, a price increase will go down easier. For example, adding a monthly activity report, a free screening test, or a backup will add value to your service. Be sure to pick items that cost you very little to give.

Keep your prices the same. You may ask, “How is this a price increase?” With the discounting pressures going on in this recession, when it seems everyone is lowering their prices, holding steady can be a big advantage.

Schedule the raising - so client have a time limit at the old price. As the recession dictates, you may have difficulty raising your prices right this moment. But you can say something like, “Even though my costs are increasing, I’ll be able to hold off raising prices till June, so my clients benefit.” You’ve now done 3 things: 1) communicating to your clients you’ll be raising prices ins a soft manner, 2) given your existing clients a reprieve which they will appreciate, and 3) given yourself a timeframe commitment for that increase you want.

Don’t give up. If sales are just too far down to justify increasing prices and you are sitting with a lot of extra time on your hands, don’t despair. Can you bundle two or three services people need and give them a discount on the whole? You would end up with a larger total sale than you would have gotten otherwise.

These are just a few of the ideas I’ve recently seen for raising service prices in this recession. If you want to discuss further, drop in a comment or call me. Of course cutting costs is another way to raise profits, but there are several recent blogs I’ve written on that subject. If you haven’t read them, check out: A Cunning Cost Cutting System for the Busy Business Owner or Cutting Costs Now: 9 Hot Areas for Creative Small Business Owners.

See also The Lowdown on Raising Prices and other articles mentioned at my website below.

Related Articles
  Raising Your Prices Without Losing Clients
  How to raise your prices due to the increased cost of gas
  Are there any businesses that are recession-proof?
  Higher Gas Prices = Lower Worker Productivity
  Unscrupulous Competitors

Article Tags: brownie points, despair, economy, gas price, gas prices, gas surcharge, hero, last gas, long time, lowest possible prices, recession, time clients



Related Forum Posts
Re: Service Or Product? - I agree with starting a Service-based Business in the economy. Here is what I think is critical: 1. Researching that your Service business has a market. 2. Marketing the Service with as much leverage as possible. 3. Product-izing the Service (aka Package Expert Knowledge). This will only help elevate you as "the" expert in your niche and make you accessible to people in different price points.
Who Said Twitter Doesn't Work...? - Last month, the BBC World Service programme, The Strand, featured 21 year-old Icelandic pianist/composer Olafur Arnalds. Arnalds achieved extraordinary success through his internet-led project to compose 7 tunes in 7 days, post them on his website and then post links to it via TWITTER. As a result his website got thousands of visitors eager to listen to his music, catapulting him to fame and bringing his music to the attention of the BBC, who featured an interview with him on the World Service programme, The Strand! So who says Twitter doesn't work? (HINT: It does help if you have something uniquely your own that other people want to get hold of...)
Re: Ways to Boost Productivity - 1. Give Employees More Than a Paycheck 2. Provide Better eSupport Channels to Promote Self-Service 3. Complete your most dreaded tasks first thing in the morning. 4. Outsource as much as possible 5. . Turn off the TV.
Re: Service Or Product? - Service company always thrive in down economy. Let look at the advertising industies in any economy, you need to advertise your products or services even if you cannot afford any other things
Show the Benefits - Offer a free test drive of the Product or Service with a Money Back Guarantee - Take the Risk out. This will help them make the decision but you have to work with them to realize it by explicitly state the benefits they are receiving.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Ten Twitter Tips For Work-at-Home Moms

Soda Vending Machine = Energy Hog

How To Calculate A Minimum Fee For Your Services

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.