How to Approach Price Changes with Confidence
Price increase. These two words often conjure different feelings and concerns over losing customers. But why make an increase to your prices something to fear?
Businesses regularly increase their prices because of increased costs across the supply chain or because inflation means prices have changed. For your activity club, cleaning equipment, the extra time between classes, and more staff hours will have changed what profitable classes means.
So, if you're sitting wondering whether now is the right time for you to increase prices, here are a few tips to make sure parents stay on board.
When Should I Increase My Prices?
There isn't a solution, formula or perfect answer to when you should put your prices up. But having a plan can help influence your decision.
Top Tip: ClassForKids CEO Nikki - former tennis coach - recommends having a plan around your price increase. Here’s what he has to say, “Don't jump in at the deep end, always have a plan! You may decide to make small, consistent increases over some time as opposed to hiking your prices up by 5% out of the blue".
Many businesses like yours still sway over increasing prices. Why? Because they're scared of losing customers. And we get it - changing prices CAN be scary. But often, it's not the price increase that customers are frustrated with; it's how you as a business owner handle and communicate it.
The main thing to ask yourself is "why am I increasing my prices?" and "how will I inform my customers?". If you can answer those two question, you'll be able to approach your customers with confidence.
Why Should I Increase My Prices?
1.Your Costs Have Increased
Your classes should always be profitable, so if the cost of doing business has increased for you, it's time to re-think your pricing. Putting your prices up is a natural reaction if you have more to pay somewhere along the supply chain.
2.You're Providing a Niche or Unique Service
If your service is very niche and your customers can't access it nearby, then you may want to consider a price increase. If you're offering a specific dance style or football technique, why not take a stand and create a premium brand with premium pricing?
Likewise, if you're offering 1-2-1 classes or something that allows you to spend more time focusing on each child, your pricing strategy should reflect this.
3.Check the Competition
Regularly analysing your competitors to understand your position in the market is good practice. But when it comes to comparing your prices, approach with caution.
Your competitors may be offering something unique which justifies a higher pricing point. The last thing you want to do is increase prices to match theirs for a completely different service. Look closely at competitors within your industry as a benchmark. Doing this will help ensure that you aren't undercharging for your classes and ensure you remain competitive.
So now you've answered why you might increase your prices, but you'll need to think about how to do it.
How to Tell My Customers About a Price Increase
There are four things you can do to maintain your customer relationships, even with a price increase!
1.Be Honest and Tell Parents Upfront
You'd be mad if Netflix started taking more from your account without telling you, right? Well, your customers aren't any different. Make sure to announce changes directly to your customers in writing with plenty of notice! This way, you have a clear idea of what you've sent and to whom.
2. Be Consistent - Increase Little and Often
If you surprise your customers with BIG changes out of the blue, they will be surprised. And that's why adopting a pricing strategy that considers costs associated with your business is super important.
If you increase your prices little and often, it won't be a big shock to your customers. But if you hardly ever increase your prices and hit them with a massive increase, they might have something to say.
3.Show Your Value
Remind your customers of the value you offer and explain why you're increasing prices. It could be because you're hiring a specialist or because you want to provide more 1-2-1 classes.
But, you could also be increasing prices because external factors have affected your costs. It could be because associated materials have increased in price, or because of 2020, you need extra cleaning equipment.
Explain that to your customers, and they'll be understanding. Transparency is key.
4.Create a Line of Communication to Ask Further Questions
And finally, make sure you create space for your customers to ask questions. You want to make sure they have all the information they need in the first instance but create space for them to talk to you about it.
Price increases can result in you losing some of your customers, and that's why marketing matters. With any change to your business, you should always have a clear marketing strategy to know how you'll target new customers.
There are always new opportunities to market to new customers via word of mouth, Facebook Ads, Instagram and Google Ads. So make sure you factor this into any change, including pricing, you'll make in business.
So there you have it! A process for changing your pricing without losing all of your customers. Remember that you may lose a few along the way, but it's the quality of your classes that matters most. Long-term, loyal, committed customers will see the value of classes over price - there are always new opportunities in targeting new customers.