A lot of service providers have a desire or even need to raise pricing, but fear by doing so it could lose them current business. There is nothing easy about breaking the news to loyal patients or clients that their services are going be increasing. But, if a business needs to raise prices in order to thrive, it is a skill we must all master.
With the right approach, we can turn raising prices into an art. An art technique we must grow and maintain in order to have things like, a well paid and trained staff, upgrades for equipment to the latest standards, or to pay to increase your training. Of course those getting charged do not understand this, nor do they need to know. I am going to layout a method that allows raising prices, so that you can keep providing the highest level of service to your market.
First we need to cover a little psychology. The first and most powerful tool people have to determine value and justify paying higher prices, is relativity. So if we try to just arbitrarily change prices, there is nothing for your clients to use in comparison, except the old lower price. This will lead them to resent the increase and may lead to coming less for service or worse, leave you for another option.
Per MIT professor and behavioral psychologist, Dan Ariely, the need to use relativity for decision making is inherent to life itself. His article, “Humans and The Slime Mould” is based on how such base forms as slime use relativity to make ‘decisions’. You can see it here http://danariely.com/2010/09/05/humans-and-the-slime-mould/
Whenever you are in a position where a price increase is needed, do not just raise the price on an existing service. You need to add THREE new services. That will allow the comparison to one another. This triggers the impulse in your clients to not resent the increase, but examine which option they want to choose that fits their needs.
The best thing to do, is to have two nearly exact set of services, but have one with a little less service. That will be your lower priced of the two similar options. You want to then have the higher priced option show better qualities that are obvious. Much like when shopping for car, there can be two nearly same models, but one has cloth, while the other has leather interior. People want the leather as soon as they see and touch it. The mind begins to justify the higher priced option. The same will happen more often when you present two choices as well.
What about the third option? Well, that is simply there to push the choice between the original two similar options. So, using the car example, a third option could be a minivan or pickup. The mind immediately eliminates that choice and compares the similar two.
So if you are at a typical price of $100 and need to get that raised to $120 (a 20% increase is hefty), then create two new packages priced at $100 and $140. If you get 50% uptake from 10 clients on the new package at $140 that equates to a new billing of $1,200. Thus, you get your 20% increase that you need, but clients are now happy to have been able to make a choice, instead of paying an increase.
A third choice would be of completely different service(s) that do not relate. The mind is going to eliminate that option and decide between the packages that are more aligned.
Another quick tip is to also name each new service, so that it gives it a relationship of what it represents. You do not have to be the next Stephen King. Just call one service something like, “The Progress Package Plus” and the other “The Progress Package Lite”.
To finish up, you are going to need to raise your prices if you are going to be in business over a long period of time. It is a mistake to try to keep low prices, because that will eventually hurt your clients results. You must be able to pay to keep a top notch facility, staff, and practice. However, just raising prices with nothing to compare against can work against you. That is why you need to be creating new services. That helps people people use their intellectual tool of relativity. In the end this makes people feel they are in charge and not just dictated to take increases. It is always nice to have people thank you for raising their cost isn’t it?