Raising Prices

Well, our service is cleaning, and we actually provide better than average service. The ROI in our business is obviously a clean house, but it is also quality of life, we have no employees and build enormous trust in ourselves as people they can count on, we offer guidance on home maintenance issues, offer other services for cleaning their carpets and automobiles, etc. Our customers really genuinely like us as people and value our service.

I brought this up not just to get into our business though. I figured that this subject is pertinent to a lot of people here that provide SEO, direct mail, or other potentially ongoing services. Pricing mistakes are common.

I think a lot of people realize a year or two down the line how they've really sold themselves short. Not sure if the special new client pricing would fly in such an instance, though I guess cable companies do such after a year.

I had an advertising rep ask me the same question. Here is how I answered her...

"You need to raise the price all at once. It is't the amount of the increase, it's that you are increasing your price at all. So, increasing it slowly just multiplies the number of times you will create anxiety in the clients."

She needed to raise her price from $450 to $600. I told here to say that they were going to raise the price to $750 because of costs going up so drastically, and that they had been holding off raising their price for a few years.

"Tell it to them in person. Then say you will fight to hold the increase down.
When it comes out only $600, they will breath a sigh of relief."

She did, it worked...and my price went up to $600....So I ..won? :rolleyes:


Another way is to give a gift, and explain it's because they are good clients, and there has to be an increase. You may lose a few. But it isn't like you are doubling their fee.

I guess I didn't address that side Aaron, but I agree as far as clients that know one another. We get lots of referrals and would only raise one of the group if we did the rest at the same time, but the reality is that we have some that don't need to be raised at all that we priced more recently while others were priced many years ago. Some are loners, others have lots of friends and family that we work for. Makes it all kind of tricky, as coming up with a one size fits all structure is difficult when every client is so different.

I've been performing time studies on our homes. Some we make $30+ per hour, others $20 and sometimes even less. Over time things change. People add kids, pets, and let's face it, everybody fills there homes with more "stuff", all of which adds to the workload. Some homes are close to us, and others are 30 minutes each way. Lots of things come into play.

We know that some will be unhappy. It used to bother me, but as time has gone by I've realized that clients we thought were friends were only friends as far as the money went. In other words, if they decided to spend money on something else, or money got tight, we as the cleaners were the first to go. So, in a relationship predicated on money, money will always be somewhat a determining factor in how people feel about us. They have no problem dropping us if need be financially, so we should have no problem raising our prices to a respectable amount and dropping them if they can't pay it. It's the cold truth, even if we've watched their kids grow up or house-sat for them while they were on vacation and slept in their home and cared for their pets.

I'm not going to raise prices without a detailed explanation. If you've ever seen my posts here, you know that I will probably over-share if anything, lol.

I even did market research and questioned local companies on their prices based on a certain style of home and with certain qualifications, and know the average price for that home. I also know that most of our homes are far larger than that and priced maybe even lower than the average for the smaller home that we queried about. The home in question got me an average price of $120 or so when we contacted other companies (though admittedly only a few even bothered to respond, which is typical), and we charge $85 for it. We have some ground to make up, particularly with some clients that we've had for many years. At the same time, we realize that to be our fault.

Wish I could say that was true here with confidence. We have tried raising prices in the past on a much smaller scale with some mixed results. Lost a few clients over not much money. The problem is that some people place a very limited value on certain services. Although we lost some, they were clearly drawn to us based on price more than anything when it came to a head. We replaced them with people that were more appreciative. Some people get ridiculous over things. We have a lady that asked us to clean her refrigerator. She's a lifelong realtor near retirement, has been quite successful, and has plenty of money. My wife emptied her fridge and was starting to clean it when the lady realized that we were charging $20 for cleaning the fridge. She asked my wife to put everything back and said that she'd do it herself. You would think that the lady didn't appreciate us at all. Then again, she hugs us when we come over, gives us little gifts, but for some reason paying more cash money for services feels like robbery to her. We raised our prices $20 for detailing and she couldn't spend it to get her $40,000 SUV detailed, instead opting to take it to a car wash.

People are emotional about their money, rather than logical, which always makes it a gamble to raise prices. We could very well lose much more than we gain in the short term, but we can replace those clients with ones that will pay more. I wonder how this experience compares to marketing. I would imagine that it is a shared experience across the board, no matter what service is being offered. Or maybe we should have branded ourselves better from the beginning. We kind of set the expectations one way and are trying to change them. We often teach others how to treat us.

Thanks to everyone that responded. I really appreciate it.

I've got all of the financial possibilities outlined. I have a spreadsheet where I calculate all kinds of things, from what the price is to what it should be to what it could be. I've got numbers on how much we stand to profit and what we also stand to lose. I love numbers, so I've done lots of analysis.

Thanks for giving me a push to not settle for even just average on our pricing structure, and for helping me to bounce the way that price adjustments should be made off of others that are more experienced. My wife and I have worked really hard to get here. The goal now is to maximize our earning potential in what we already have to free me up some time to pursue my dream of marketing and consulting.

Who knows, maybe this time next year I'll be asking for advice on pricing my marketing and consulting services. It is indeed a dream, maybe that's the next reality.