Raise your fees without raising the roof
December 31, 2007 by ShannonCherry
Filed under Business
Recently, a small business consultant who runs a business membership organization complained to me that she was surprised to find her renewal rate was down 50% from the previous year.
As someone who was running this organization for 5 years, she realized that she always loses a few members each year. But 50%! What gives?
It was easy for me to see the problem. She increased the membership dues 25%. But that really wasn’t the reason for the multiple rejections. It was that she didn’t communicate the rate increase to the membership. The sticker shock turned about half her current members off.
My approach was much different this year, compared to this business consultant. I knew I’d be raising my rates as I was getting busier, so my time is much more valuable. When I finally set a new price for my packages for 2008, I announced the new package prices, which are more than 25%, to my ezine list in October. I also reminded them in November and December about the increase.
This did a couple of things: prevented any sticker shock someone may have had if he or she decided to hire me thinking my prices in 2008 were the same as in 2007. It also got some potential clients motivated to lock in a package at the 2007 prices by January 1. One smart cookie actually extended the package for a year in order to get a great deal.
I own a membership driven Martial Arts School. I raise my base price every year. New members are easy because they usually don’t know the difference. For current students, my programs are a year long. I increase prices for current students when they move into a new program. It’s a win-win because this program is an upgrade and we get the price increase.
Oh yeah! I forgot. We preframe the student when they first sign up that eventually they will move into the upgrade program.
Great post! I always struggle with this. How do you tell them you are raising your rates, when, etc., without losing clients? Or without losing good clients, I should say… I just raised my rates, and am in the process of letting my clients know, so this was great timing!