How to increase price?

[adejones]

Hi all

I have been providing a subscription type web service for around 6-7 years now but have never increased my pricing, though as my costs constantly increase I think I need to think about this.

Currently £250 per year, was thinking of an increase to around £269 per year (just under 8% rise) which at the current number of subscribers I have, would increase the annual turnover by approx £3,762. In my eyes, that £19 is not such a big jump for the customers but the £3,762 would make a big difference to me.

Question is, how do I go about doing this, do I just increase this on my invoices from a certain date and that's that or do I need to give my subscribers some pre-warning of this? As I take pride in my customer service to my loyal subscribers, I would prefer the latter, and even thought of going as far as asking them on a poll if they'd be happy to pay £19 more for their service to gather feedback before I did it.

Advice and opinions please guys, thanks in advance.

 

[NickGrogan]

What does your contract say?

 

[adejones]

Good thinking, I wrote some T&C's but have not reviewed them as they've never been enquired about. There's a line in there which states "Annual charges may increase in line with inflation, any increase will be preceded by an email notification at least one month prior to the rise."

 

[Mark T Jones]

Good thinking, I wrote some T&C's but have not reviewed them as they've never been enquired about. There's a line in there which states "Annual charges may increase in line with inflation, any increase will be preceded by an email notification at least one month prior to the rise."

That's the answer to your question - there might be some question around what measure of inflation you are using.

My advice on these contracts is 'little and often' or, in thise case, per contract, to raise prices by (whichever) inflation rate annually.

 

[adejones]

Thanks Mark, little and often sounds OK to me and i'd consider a first 8% rise in 7 years to be reasonable.

Based on this table I work out the inflation between 2015 and 2022 to be around 17% so i'm still under that.

So plan of action then, email all subscribers to notify them of new annual cost from 1st July, a rise of £19 (8%) which is still well under the cost of inflation over the past 6-7 years (17%) and hope they're all satisfied enough not to offer any negative feedback.

 

[Mark T Jones]

Thanks Mark, little and often sounds OK to me and i'd consider a first 8% rise in 7 years to be reasonable.

Based on this table I work out the inflation between 2015 and 2022 to be around 17% so i'm still under that.

I'd certainly expect some push-back on a single price-hike like that.

Ultimately it will depend on how easy/cheap it is for them to change, and of course whether there is loyalty in your model

 

[adejones]

Sorry I forgot to add link to the table I mentioned - https://www.rateinflation.com/consumer-price-index/uk-historical-cpi/

You say single price-hike, remember this is only £250 to £269, would you consider that excessive? My main competitor starts at £525, another competitor of mine starts at £480.

 

[Mark T Jones]

Sorry I forgot to add link to the table I mentioned - https://www.rateinflation.com/consumer-price-index/uk-historical-cpi/

You say single price-hike, remember this is only £250 to £269, would you consider that excessive? My main competitor starts at £525, another competitor of mine starts at £480.

If those are differentials for the same service you are unlikely to lose many.

But again, moving forward, set the expectation of consistent, undex-linked rises, rather than stop and surge

 

[ctrlbrk]

As I take pride in my customer service to my loyal subscribers, I would prefer the latter,

As also Mark pointed out, you've answered your own question here.

Depending on your business model, are you able to sweeten the pill by adding a little extra to your subscription?

I mean something that doesn't cost a lot for you to add and that your customers may find useful?

 

[MBE2017]

I would set out the regrettable reasons for the increase, and not only show the annual figure but show the monthly amount as well, approx a £1.50 per month increase over seven years.

 

[AstEver]

I somehow like the idea of adding value, if possible, to the product/service whenever the price increases. It gives you options in communication with the customer, increases acceptability of new price, improves your offering, etc.

Can you think of anything that you can add to your service that is not going to cost you a lot?

 

[Alan]

First thing springs to mind 8% is small for those that have been with you for 6 years - but what about those that signed up last week?

The gain of £3,700 assumes no loss from your approx 200 customers, a price rise is likely to mean 1%-2% will leave ( spurred on to make a decision) so your gain will really be more like £2,000

As mentioned above, little and often is a good idea, I have been guilty myself of not increasing subscriptions.

You say single price-hike, remember this is only £250 to £269, would you consider that excessive? My main competitor starts at £525, another competitor of mine starts at £480.

Begs the question why are you so cheap if a true competitor is twice your price.

 

[WaveJumper]

Something within this thread for anyone else who has not increased their prices a business should of course be keeping a close watch on their costs, increasing your charges as mentioned above in small increments has to be the way to go t&c’s should always allow for this.
How do you charges stack up against the competition. One thing in your favour is everyone at the moment sees everything going up in price and to be honest it’s probably not to difficult to justify however right now I think people have reached a point and are very much looking to save where ever they can so with that thought keep one eye on your competitors and tread carefully.
And having said that I for one this morning cancelled one internet provider for another to save £4 a month

 

[Lucan Unlordly]

I mean something that doesn't cost a lot for you to add and that your customers may find useful?

This.....

.....but i'd also take a slightly different angle and list all of the things that you've already done that have enabled you to continue offering the service at a lower price than your competitors. Things that you take for granted like the new servers your webhost upgraded to that greatly enhances the sites security may have cost you a tenner a year but adds to the reason for a price increase. The back end administration updates that enable you to more quickly deal with each customers issues in order of importance. 'Cushion the Cost' of the increase by wrapping it with a good story. We only ever increase the price after making visible and useful changes, adding new features etc.,

Regarding the price increase. Unless they pay by direct debit, why tell them it's going up? Our subscribers are constantly calling to see what the latest price is,...they haven't got a clue......and just assume there has been a rise.

 

[adejones]

Begs the question why are you so cheap if a true competitor is twice your price.

I was waiting for someone to ask this question - and the easy answer is I haven't always been so cheap. When I very first started, my main competitor was £295, but they had the monopoly, around 6000 out of a potential 9000 customers. After a couple of years, they doubled their cost and introduced a new 3 level pricing structure with the cheapest level being double that of their previous cost, because of this they started losing customers, and around 140 of my current 198 customers have migrated from them. Just to note, they didn't do anything or offer anything additional to justify the cost, their service has stayed the same and their product looks very dated, this is actual feedback i've had from some of their current/ex customers.

 

[adejones]

First thing springs to mind 8% is small for those that have been with you for 6 years - but what about those that signed up last week?

This is a good point - I have a minimum term of 2 years, a lot of my customers have been with me since the beginning, could I perhaps raise my cost by that 8% (to £269) but add that any customers still within their first 2 years will remain at the current cost until their 3rd renewal as a gesture of good will, and any new customers from the date of the rise will obviously also pay the new cost? Or is that getting a bit messy.

 

[JEREMY HAWKE]

I dont see any reason why under the present circumstances that you cant raise your prices
Everybody supplying you are putting their prices up and it is only the right thing to do for you to recover these increases

 

[Benjamin Brain]

@adejones I like Virgin's approach.

They've upped my subscription fee a couple of times over the years (probably more if I thought about it) but each time they prepared me for it and send me a letter telling me that they really value me as a customer, they've kept their price as low as they can and to continue to provide the service that they know is valuable to me, they need to increase their prices.

It might be worth considering doing something similar.

(If I've read the thread correctly) You could even mention that you've not increased for 6 years despite every other service in the world having put their prices up at least a couple of times, but in order to continue............

I used to work in property - the Govt. introduced a new law whereby as a letting agent, you were no longer allowed to charge the tenant a fee. The only way to make up for this loss in income (which was probably most agent's entire profit margin) was to charge the Landlord more.

Some agents did it well - sending a letter, explaining why and reiterating the benefits that the landlord will get.

Others didn't by just raising the price and sticking their head in the sand.

Same strategy, different execution - very different results!

Good luck with it. If done in the right way, upping your price can be one of the quickest and easiest to boost revenue.

 

[IanSuth]

How about,

As of July 1st new subscriptions are being raised to £275pcm, however as a loyal customer until the end of Dec 2022 your subscription will only be rising by £1.58pcm to £269 per year, this is our first rise in 7 years and is precipitated by the unprecedented rise in costs.

That explains it, makes a rise seem like a good deal and builds you in another small rise at the end of the year

 

[Talay]

The increase is meaningless and only £19 over 5 or 6 years ?

How on earth will you justify an increase in the future ?

Go to £349 for new signups and £299 for retention.

 

[SillyBill]

Thanks Mark, little and often sounds OK to me and i'd consider a first 8% rise in 7 years to be reasonable.

Based on this table I work out the inflation between 2015 and 2022 to be around 17% so i'm still under that.

So plan of action then, email all subscribers to notify them of new annual cost from 1st July, a rise of £19 (8%) which is still well under the cost of inflation over the past 6-7 years (17%) and hope they're all satisfied enough not to offer any negative feedback.

The question to reflect on is why feel the need to be working to get back less purchasing power each year? CPI is the absolute minimum my prices go up by annually. The mistake here is not increasing every year, "conditioning" customers for price increases is essential for a good business with longevity, advice is get into the habit of doing it every year on 1st Jan for these types of contracted services. Even if it is 1%, it is important to always set the tone your prices don't go down or stay the same, they go up. You know the competition so you can still be more cost effective than them if that has to be the USP. I say this from experience that delaying price increases never works in your favour and you will never be thanked for it. In fact you often end up either bust and/or working with the a**e end of the market who expect the moon on a stick for nothing. I've purposefully priced us out of some such markets to avoid this so we can do 3x less volume for x2 more money.