From XU Magazine, 
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The 'How To' of the Rates Increase Conversation

January 15, 2020

Increasing rates is a reality that all businesses face, and all customers go through at some point in their lifetime. As a business upgrades or upskills, the product is slowly increasing in quality. The issue is, you can’t be doing more for less and customers will understand that if explained correctly. Sometimes that conversation can seem a little daunting. If other prices in the industry are staying put, then the scary reality that a customer may look elsewhere is apparent. Handling the price increase with caution and care and selling these higher prices to the current customer is how to decrease churn!
This article originated from the Xero blog. The XU Hub is an independent news and media platform - for Xero users, by Xero users. Any content, imagery and associated links below are directly from Xero and not produced by the XU Hub.
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Approaching the increase head on.

But when should I increase my rates?

There are so many individual reasons rates could increase. Knowing when to increase them is so important and down to each business. Things to constantly consider are around competitors pricing, raw material pricing, demand, upskilling and quality of the product.  

If you notice competitors or key players in your industry are increasing their rates or your rates are slowly becoming the lowest, this may be a hint that you are pricing too low.

Raw materials or essential materials your business requires may increase in price (yes, everyone increases rates!) which will affect your own bottom line. This is another hint that your prices may need to increase also.

Are you noticing your business has a huge demand that you can’t quite satisfy? This is a huge hint that your business could benefit from a rate increase.

There is a large focus on upskilling in businesses. By upskilling your team, you are improving the quality of your product! If this does not directly spark a rate increase, then you will be selling a higher quality product for less than it’s worth.  

New rates need actual numbers.

So, you have figured out that your rates need an increase, figuring out what to actually charge can be quite a challenge. This little list is a few starting points:

  • Research competitors pricing. Some competitors won’t display their pricing directly online so this may take a little time and some savvy investigations work.  
  • Tiered pricing. If you have been charging a retainer or hourly rate, moving to tiered pricing gives the client the opportunity to choose what they need and for you to charge more for less or do more work for more.
  • Figure out where your time is. Some clients may be taking 40 hours per week and other may be taking up 20 hours, but both are being charged the same retainer. Figure out which clients are more profitable and which ones you may be ok with letting go.  
  • Test the waters. A new client contacts you? Tell them a higher rate that you have not yet implemented and explain what this directly includes. If they decline, you are no less worse off than you were, and you know where your rates should sit.  
  • Growth charges. Have a conversation with your client about all that has been accomplished together, what has been learnt, any upskilling you have had. The client will see what you are worth and you can either offer a higher price or they may just offer it then and there!

Ok, so how do I let them know?

How soon?

Letting clients or customers know far in advance of your plans to increase is key. Send multiple emails and set up a time for a face-to-face or phone chat, this way you will know they have the message. If they are unhappy with this increase, you will know about it and will be able to work together to figure out why and what you can do to help.  

Keep everything friendly in every email and phone call – even if they are not happy with the change, this may help keep them calm. We’ve all been there when a customer has remained angry even after polite responses. The best thing to do is continue being as polite as you can to maintain the relationship, even if they do decide your service is no longer for them.  

Let your customers know the reason you are increasing their rates; they will like the transparency. If customers are explained why rates are increasing, this may help them understand and may even help them to better appreciate the service they’re getting.  

Curating the message.

Increasing rates can be a scary thought but most customers will understand. Remember that for most, a small increase in rates for a valuable service will not be a deciding factor.

If you are still stuck for what to tell clients, we have found a great template from HubSpot's (Amareson, 2019) very own blog on increasing rates:

Price Increase Letter Template

[Date] [Organization Name or Logo] [Address]

[Customer's Name] [Email]

[Address] [Phone Number]


Dear [Customer's Name],

This letter services to advise you that there will be an increase of [Percentage] on [Products and/or Services] to be put into effect on [Date]. This increase is due to [Reason].

[Company Name] is committed to offering you the quality you expect and deserve. We have found a way to minimize the price increase to the least possible amount while still achieving our desired goals.

All orders made before [Date] will be honored with the current price, so we highly encourage you to order soon to take advantage of this.

[Company Name] greatly appreciates your continued business and support through this time of growth and change. If you have any further questions or concerns regarding this price increase, please do not hesitate to reach out. Our team is more than happy to discuss this situation with you


[Sender's Name]


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