Raising fee for service & losing customers

[konmai]

hi guys,

i recently raised my fee for my services due to the high demands. i got some angry feedback saying i was greedy and customers are disappointed.

i've been losing lots of customers and am afraid of negative word of mouth advertising. anyone experience this? what did you do? could really use the advice!

thank you.

[ar81]

This is why discounts exist.
They increase your profit as more customers use your services.
Your customers could be right.
I am sorry to say that, but that's what a customer might think.

Tell your customers that you were evaluating elasticity of demand.
That it was pricing evaluation before customers.
So as the evaluation ended, you go back to normal price.
Period. No further explanations.

[Still Growing]

One strategy is to make your new fee lower. For example, lets assume you charge no fee starting off and then all of a sudden you start charging a $20 fee. People may get upset by this.

What you do is just start with a $5 fee to get them used to paying the additional fee and then you slowly move it up over time. Its hard to have no fee and then make a high fee.

The other option is to just work the fee into your pricing via cost averaging. To do this you would possibly add $2 to your $20 items but only $.20 to your $2.00 items. The price increase becomes less noticable.

Another option is to have a minimum order fee. You can tell customers that the fee is waived for $100 orders and up, for example. Hey its not your fault if they use you only for some items and use your competitor for other items. This is called cherry picking and customers often cherry pick their vendors. You are then rewarding your good clients who order a lot with you and it may even encourage customers who must by from you to buy all with you so that they don't have to pay the order fee.

There are thousands of variables involved with what we are discussing here. You really need to talk to an expert or know what you are doing before adding fees. They can be the smartest thing you ever do or suicide.

[Liveformx64]

the fees you are charging is largely dependent on two things.

1. Competition

2. Value

If you provide the exact same service as someone else in your direct market, than you have to play the price wars.

If you don't want to play price wars, you have to convince your customers that your service better. Notice I didn't say you have to provide a different or better service you simply have to convince your customers of this. Or perhaps you service is better, but you haven't told your customers why.

My line why I charge more is. "we are more expensive, and here is why".

2. Value, are you truly providing enough value to your customers? What made them leave? Are they choosing not to purchase your service period? or are they getting it elsewhere?

[funchy]

It's normal to get a little grumbling. If it's a suprising amount, I'd suggest that the way in which the new prices went into effect was too upsetting.

The way it was presented may not have been in such a way that earned their understanding. If it was just a blunt note (or no warning at all), people will be caught off guard. It makes me really angry when I'm a regular customer somewhere placing my usual order, and when they do a price increase I don't find out about it until after I get the good/service.

Price increases are inevitable in any business. In my opinion, I'd suggest an incremental approach. Raise it a tiny amount and get them used to the new price. Then six months later nudge the price up again. Explain apologetically "we're sorry to have to do this to our loyal customers" and deflect the blame to "rising fuel prices" or something they can relate to.

[seeker5]

Originally Posted by konmai

hi guys,

i recently raised my fee for my services due to the high demands. i got some angry feedback saying i was greedy and customers are disappointed.

i've been losing lots of customers and am afraid of negative word of mouth advertising. anyone experience this? what did you do? could really use the advice!

thank you.

Konmai, how much did you raise your fees? That is, by what percentage? Did you raise them 5%, 10%, or did you raise them a whole bunch like 50% or 100% or more at a time?

How much advance notice did you give your users? Is your service the kind of service people have to come back to or not? That is, did users have enough warning after you raised your prices so they could relatively easily choose to use another service instead of yours? If not, that could explain them being mad.

As a collary, did you warn them of the increased price before they bought your services, or did you tell them only after they had used your services?

[dannielo]

You either:

- didn't raise price with only 10%-15%
- didn't raise value along with price

You should do both. Also, a 30-90 day notice would have been nice.

[konmai]

it may have been the delivery. the notice was for 2 weeks. all my current customers received mail & email. i raised the price from $115/session to $250/session. clients in que would still be charged at the original fee and all clients in que after specified date will be charged the new fee.

the new fee isn't a surprise. since when i charge, the total is there in black. i send email and snail mail to customers to renew for my service while i also continue to advertise for new customers as well. i'm still getting some customers as well as new customers, but i did lose some customers as well. the que was really backed up. i do have some competitors, but i believe in the quality of the service i provide. i.e. i don't charge extra if a problem occurs. i even go to the client's home to remedy the problem UNTIL it's fixed. i don't know any of my competitors doing that.

some of the customers who did threaten to leave me actually booked for another year. i know i lost some trust due to the increased price, being called "greedy" and lots of other things. after a few weeks, my schedule is actually booked again. it's weird.

[ns123]

for me, it would depend.

If you charge for a service, such as consulting, and I hire you at the rate of $115. I like you, and you have not finished the job... and then, one day, you say, oh, my rate is now $250/hr so from now on, I'll charge you that. That I think is unethical, because they may have budgeted that it takes 3 months at $115/hr, and now, it's 2 months at $115/hr and the 1 month left over at $250/hr. Which is not ethical.

For example, I hire a interior designer at $115/hr. She works with me for how ever long it takes to remodel my home. In the middle of it, she says, oh, my rates have changed to $250/hr so any future work would be at that rate - I would be incensed! I would be like, but... but... the job is not done! And now I have to pay you MORE? If I knew you would up your rates, I would have hired some one else! Do you see where I'm going? Doing this would be very unethical.

But if you didn't do something like this, I don't see any ethical problem with it.

One thing I would recommend is telling them personally. Call each one of your clients and talk to them personally. The email/snail mail, etc is too impersonal. If you've been doing some work for me, and you want to charge more for further new work, leaving me a note about it will really anger me. it's as if you were copping out. But, if you talk to me about it I'll be more inclined to understand.

So it just depends on what is the nature of your service and at what point did you start charging more.

[konmai]

oh ok. yes. i like your suggestion of calling each client individually to notify them of the change as well. i do understand how an email & snail mail would be informal. i think i was too chicken to talk to each person individually, b/c at the time, i was also afraid of increasing the fee.

no. nothing unethical. i charge the same fee until the job is complete.

[Eisho]

Originally Posted by konmai

hi guys,

i recently raised my fee for my services due to the high demands. i got some angry feedback saying i was greedy and customers are disappointed.

i've been losing lots of customers and am afraid of negative word of mouth advertising. anyone experience this? what did you do? could really use the advice!

thank you.

How about reverting to the old fee structure but offering service grades - gold, platinum or whatever that gives faster service, more attention or something and are offered at a higher rate?

Cheers,

Eisho

[Parthon]

Originally Posted by konmai

it may have been the delivery. the notice was for 2 weeks. all my current customers received mail & email. i raised the price from $115/session to $250/session. clients in que would still be charged at the original fee and all clients in que after specified date will be charged the new fee.

the new fee isn't a surprise. since when i charge, the total is there in black. i send email and snail mail to customers to renew for my service while i also continue to advertise for new customers as well. i'm still getting some customers as well as new customers, but i did lose some customers as well. the que was really backed up. i do have some competitors, but i believe in the quality of the service i provide. i.e. i don't charge extra if a problem occurs. i even go to the client's home to remedy the problem UNTIL it's fixed. i don't know any of my competitors doing that.

some of the customers who did threaten to leave me actually booked for another year. i know i lost some trust due to the increased price, being called "greedy" and lots of other things. after a few weeks, my schedule is actually booked again. it's weird.

Firstly: A customer complaing says more about the customer than it does about you. Perhaps they can't afford to pay that much, or have hang ups about spending that much money, or just think any price rise is unethical.

The underlying reaction though, if you ignore the words, is that you still have a high demand after the increase. As you said, you are all booked up again, and have lost few sales. If you have lost sales, these were sales you couldn't handle at the low price.

I think you've just finally started getting to a price that accurately reflects your value. But there's some doubt in you about your own value, so you are using customer comments to feed that doubt. You know what you are worth, so find that doubt and uproot it. Otherwise it will grow and cause problems.

[JimOfferman]

If you think the new price is fair (and the fact that you're booked full again would support that notion), then you just have to stick with it.

[konmai]

guys -- thanks so much for all the insights and suggestions. things are working out so far, & it does feel bad to lose some old time customers. i feel they are what makes my service. i do have advertisements, but i think my service have come this far first not only b/c of the quality i provide, but also b/c via word of mouth from my older customers.

i'm thinking about initiating some special discounts for work that require less sessions for my older customers for a limited time every now and then throughout the year.

does that sound fair?

[Parthon]

Have a return special, half price for those that have booked with you before the price hike, but only for a limited time, say 3/6/12 months. That way your old customers can still have the old price, but the new ones pay the higher price.

The biggest problem I can see here though is that it will cause a rift between the old customers and the new. Perhaps only 2-3 uses over a 6 month period.

While your old customers help get you where you are now, you don't really have an obligation to them. It would be nice to keep the prices lower just for them, but in the end it could prove to be too difficult and time consuming.

[jpmcgrew]

Good idea on the discounts. That always seem to make things settle better. I think that will alleviate some of the tension amongst a few of your potential clients. Best of luck!