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How to Take the Bite out of Raising Fees
by Erika Napoletano
All companies struggle with pricing — how much is too much? It can be especially difficult for small and midsize businesses to balance what they charge with what the customer will bear.
However, there comes a time when it just makes sense to raise prices, and with the health of the economy improving, this could be a prime time to reassess your pricing strategy and make some upward adjustments.
With that said, any kind of price increase should be considered thoughtfully and implemented carefully. In this post, we provide a few ideas to help you evaluate your market, establish new pricing, and ease your existing customers into paying a bit more for what they already know and love.
Evaluate Your Market
Before raising prices, it's important to get a clear picture of what your industry and competition are charging. If you’re a hyperlocal business, evaluate other businesses in your area that serve your industry. If you have a larger reach (national or international), conduct a wider-ranging evaluation of going rates for similar products and services.
You may also find that a pricing increase is warranted based on your overall reputation, demand for your products and services, and your business volume based on referrals. When people love what you do and how you do it, incremental price increases can increase profits while still keeping your most critical business asset (your customers) happy.
Establish New Pricing
When implementing new pricing on existing products and services, you need to determine an acceptable threshold. Here are some questions to help you put prices in context:
- Do my current margins allow me to earn an acceptable return on this product or service?
- How much do I need to increase pricing to make offering this product or service worth my company’s while?
- Are there additional features being added to existing products and services that will help justify the increase?
- Can I offer client testimonials to help support my pricing increase?
Ease Customers into New Pricing
There’s always the fear that raising prices could alienate your existing customer base. When you’re ready to roll out your revised pricing, here are a few strategies that can help ease the transition:
- Offer grandfathered pricing for existing customers: Acknowledge customers who have been with the company by letting them pay the old pricing for a set time period (say, six or 12 months).
- Gradual escalation: If you’re a service-based company, it may be helpful to offer a scheduled increase in costs — for example, an increase of X percent up front, with additional X percent increases at three and six months.
When it comes to pricing, you're the only one who's going to keep your company's pricing inline with both the value you offer and the standards for your industry. Pricing isn't just about how much you charge. It's about keeping your company profitable — in every economy.
About This Author
Erika Napoletano is an author, columnist, speaker and branding strategist, hailed by Forbes as a “spinless spin doctor.” She's a twice-published author, including The Power of Unpopular (Wiley 2012), a columnist for American Express OPEN Forum, an acclaimed speaker from TEDx Boulder 2012, and speaks at conferences across the U.S. on the inherent power of truth in business… or as she refers to it, the power of unpopularity.
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PNC is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). This article has been prepared for general information purposes by the author who is solely responsible for its contents. The opinions expressed in these articles are those of the author and do not necessarily reflect the opinions of PNC or any of its affiliates, directors, officers or employees. This article is not intended to provide legal, tax or accounting advice or to suggest that you engage in any specific transaction, including with respect to any securities of PNC, and does not purport to be comprehensive. Under no circumstances should any information contained in the presentation, the webinar or the materials presented be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy or should it be considered legal or tax advice. Any reliance upon any such information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Neither PNC Bank nor any other subsidiary of The PNC Financial Services Group, Inc., will be responsible for any consequences of reliance upon any opinion or statement contained here, or any omission. Banking and lending products and services, bank deposit products, and Treasury Management products and services for healthcare providers and payers are provided by PNC Bank, National Association, a wholly owned subsidiary of PNC and Member FDIC. Lending and leasing products and services, including card services and merchant services, as well as certain other banking products and services, may require credit approval.
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