Honesty vs. Money!

[cash_is_king]

Hello guys, i've left some details out but just read this scenario please
A friend of mine has a client (A) who pays £650 for a service every month, they are absolutely happy with the service at that price. They have been with my friend for a while.
Since then my friend has managed to make her business more efficient and charges new clients £550 for the same service, it brought in more business as its cheaper.
Would you let happy client (A) know about this? or just keep charging the same, which they are happy to pay.
ta

 

[goodguy]

It's no differant than all the utility and insurance companies do.
Of course if you tell then client, he will want a reduction.

You could create "if pratical" create a standard and premium product, the old client being on the premium with a few extra benefits, to justify the increase, and when the client finds out then give him the option to downgrade, which he may or may not take up.
Of course you could then try and upsell the premium product to the new standard clients, and of course these extras will make the old client sing your praises.

The premium customers could have quicker call out times, longer payment terms, newsletters, regular project meetings etc.

 

[Ste B]

I'd like to think i'd let them know and reduce their costs. If they find out you are charging them more for the same serivice than your charging others, they might leave you althogther. Just my opinion

 

[Merchant UK]

If they are happy to pay and happy with what they get then its fine, if you make it £100 cheaper they may think they will not get their moneys worth, Surely if your friend has made their service more efficient then whatever they can charge is a bonus for them, I wouldn't necessarily give that much discount

 

[Christine Hough]

Just think how happy and loyal client A would be for a price reduction.

We all feel a little irritated because we know that to renew insurance with existing company is much more expensive than to put through a new quote enquiry with the same company after which they will match it.

But pricing is not only set by the cost to provide something. If client A could get the service for 550 on the open market, I would pre-empt them finding out for themselves and instead win their loyalty.

But if 650 is the going rate, I would instead look at charging everyone somewhere between 550 and 650, even if it is say 625. 'A' gets a reduction and is happy and loyal, and the rest are paying less than elsewhere and your friend makes more profit.

 

[Posilan]

We charge a set fee for our services and if the price changes down or the service is enhanced in someway, all customers (both existing and new) get to benefit.

I personally can't think of anything more annoying than a newer customer getting charged less than me, as an existing loyal customer (as insurance companies, AA, utility companies etc) does.

Loyalty is a two way street - you can't expect it without giving it.

Steve

 

[mhall]

If I were the customer I would be grateful and very loyal for your honesty and every time your name or service came up I would comment on your high ethics and honesty.

On the other hand if I found out and you hadn't bothered to tell me I would drop you at a rate of knots and make sure every time your name or service came up I would comment on your business practices

So I suppose it's down to what you want people to say about your business and your own plans for the long term. Short term you could certainly make a few extra quid, but don't believe for one minute you will fool me forever.

 

[SBlundell]

If I were the customer I would be grateful and very loyal for your honesty and every time your name or service came up I would comment on your high ethics and honesty.

Just think how happy and loyal client A would be for a price reduction.

I'd like to think i'd let them know and reduce their costs.

Just my 2p but I agree with all of the above - I'd be honest & let the customer know you've reduced the price to new subscribers so you're passing on the same reduction - 'thanks for being such a great customer'.

It's always far easier to retain existing customers than find new ones

 

[Philip Hoyle]

Are you sure that the new £550 isn't too cheap? Just because increased efficiency means you can reduce the price, it doesn't mean that you have to reduce the price. Why not keep it at £650 for everyone?

Have customer numbers increased high enough due to the price fall to make up for the potential loss in margin of current and future customers?

What are the competitors charging for their equivalent service?

I hope that they've compared the number of customers and profit with a sale price of £650 against the number of customers and profit with a sale price of £550.

If it costs £275 to provide, then 10 customers paying £650 produces £3,750 profit. If selling price is reduced to £550, you'd need to increase customer numbers by 40% to 14 to make the same profit. If they'd doing this, that's absolutely fine, but if not, they may be better keeping the price the same, or reducing it mid way to maybe £600 depending on elasticity of demand/selling price.

But, whether the price reduction is sound or not, if it's a directly comparable service, then, yes, existing customers should be offered a reduction - it's this kind of thing that will lose the goodwill very quickly. The alternative is to make a subtle difference to the service, i.e. as suggested above, a standard versus premium service where the people paying more get at least the suggestion of a better service, whether it be quicker, more detailed, more time spent, or whatever.

 

[youronlinestuffcom]

definitely tell them of the reduction in price! you will then have an even happier more loyal customer who will recommend you to others. always value the longterm over the short term.

 

[youronlinestuffcom]

or you could introduce a way to make the service better and offer a new premium service at 650 as well as the old standard service at 550 and let them choose...
simple!

 

[StaceyPreedy]

Honesty always wins. You can come back from a loss of money but you cannot come back from a loss of trust from your customers. I would reduce their costs instantly as what is available to one customer should be available to all.

 

[StaceyPreedy]

or you could introduce a way to make the service better and offer a new premium service at 650 as well as the old standard service at 550 and let them choose...
simple!

This is actually a genius idea, i would try it and see how it goes

 

[vvaannmmaann]

Hopefully the people paying the £650 are not reading this thread............

 

[NineteenPounds]

Consistency is really important for relationships with clients.

If I were 'them' in this case I would tell them straightaway.