One Way to Lose Customers

While many people spend a lot of time trying to find out how to increase their number of customers, many do not spend near enough time finding out how not to lose customers. What i have found is one key point that i don’t think many business, especially service businesses seem to notice, they are doing and inadvertently losing customers.

This is increasing prices at fairly substantial jumps without really having a good reason why. While it is more common to the services based businesses it does also happen with pretty much any business. Whether it is a product or a service if the price happens to increase by something that is seen to be unreasonable, there is a pretty good chance that you will not get another chance with that customer.

So the key is first defining what is a reasonable price increase and what is an unreasonable price increase. In some respects this is almost a loaded question as what someone see to be reasonable some other may not. But one way to avoid this is to consider something that you pay for yourself and think about what your reaction would be to that service or product being increased by the percentage increase you are considering. For example you decide you want to increase the price of your service by 50% would this same increase on a service you pay for be acceptable to you?

The other way that often loses customers is increasing by charging for extra or being inconsistent when charging for the exact same service. In many cases people will remember what they paid you to do last time, and what they paid, or at least roughly. So when they come to you again to get the same product or service they often expect to pay the same price. It is possible to usually make a small increase 5 to 10% and be acceptable, Much above this and you are more then likely going to start losing customers. Unless you can increase what the service or product is to compensate for the higher price.

This leads to how do you increase your price by a large percentage and off set this with perceived added benefit. For many products itself this is not always possible, however there are some ideas, such as bundling another product, or offering an installation service for free. Both of which may add a small amount to the cost but can often add much more to the perceived value, however you need to be sure the additional perceived value is something that your client will want.

For a service based business this actually becomes considerably more difficult. If you are charging by the hour how can you increase your fee by a large amount and still add more perceived value to your customer. What it really comes down to is why you believe a large increase is needed, and then if it can be justified how to present it to the customer so that you don’t lose the customer. Basically if you are charging $100 per hour and you decide to increase this is $150 per hour, and change nothing you are very likely to lost customers, some may stay on who want your services at any price, but you will lose many.

The only other way to increase your fee by a large percent without really impacting your customer base is to change the way it is perceived. One example may be if you charge a call out fee of $49 per site visit, you decide that you are going to increase your hourly rate to $140, but have no call out fee. While some clients will realize that after the first hour they are worse off, but some will not actually notice and be happy to not pay the call out.

Really at the end of the day rasising your prices by a large percent is going to be counterintuitive for many businesses, unless they can find that one thing that is the key to change their clients perception of what they are paying for. Often you will find you are better off to make a series of small increases over a longer period, eg 5-10% every 6 to 12 months, while it wont give you a boost of income over night nor will increasing your prices by 50%.

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