Tuesday, January 19, 2016

How to Announce Price Increases

As you evaluate your income and expenses from the last year, it's a great time to evaluate any pricing changes you may want to make for the year ahead.  Did you find that you put much more work into a certain product or service than you're being compensated for?  Did your suppliers increase their prices or change their product line?  Do you plan to add new services or products that will increase your overhead?  Do you need to invest more in packaging,  equipment, education, or marketing?

Whatever the reason for increasing prices, it's often one of the big struggles for small businesses who rely on retaining old clients while attracting new ones.  Most businesses find that their costs and/or prices have to increase year to year in order to stay sustainable and keep up with new market demands.  When businesses don't account for growth in their overhead, product, or service, they end up shortchanging their ability to continue serving clients well into the future.

Based on the many times I've had to change my pricing due to moving to a new market with new overhead costs, as well as helping other photographers who've needed to make changes to their pricing, I've found three strategies that help make it easier to move from one price point to the next without too much shock to an existing or recurring client base.

1. Same Rate, Different Offering
The easiest change you can make to a price list is to keep your rates the same, but redefine your offerings at each price point to more accurately reflect the time and cost that goes into creating that service and product at that price point.  The example below is for a portrait photographer who needs to move from providing too many images and giving everything away, to an offering that will allow for additional images to be purchased in order to account for the many hours they spend in post-production and retouching but hadn't been accounting for in their previous pricing model.
Example:  $250 Portrait Shoot
Before: Includes 2 hours on location, proofs online, all high resolution images
After: Up to 1 hour on location, proofs online, 2 high resolution images (additional images $75/ea)

2. Drop The Smallest Option, Add A Bigger Option
If you've presented your prices in a tiered packaging format that offers 3-5 package options, this method helps establish a new lowest price and highest price for your client offerings and makes it possible to take a big leap in price jumps from one year to the next.  This is ideal for businesses who started out too low to be sustainable and need to make a big move forward from year to year until they reach sustainability.  Since most clients tend to fall in the middle of package offerings, very few people end up booking at the bottom and top ends and generally move themselves into the middle.  When you take something that used to fall in the middle and make it a baseline package, you open up the opportunity for new clients to see a new middle ground while old clients still see a package number they're familiar with.
Package A: $1500 Shooting only, everything else a la carte
Package B: $2900 Shooting + some things included
Package C: $3800 Shooting + more things included
Package B: $2900 Shooting only, everything else a la carte
Package C: $3800 Shooting + some things included
Package D: $4700 Shooting + more things included

3. Baby Steps
People who've been in business for a long time and have very established recurring client bases, sales packages, and a good understanding of their time and cost invested generally only need to adjust prices slightly year by year as needed without much change to their offerings.  The idea is that smaller changes each year are less alarming to regular clients than dramatic changes.  They may even do this without any announcement or fanfare, just making small adjustments as needed.  As clients become comfortable with new prices year to year, the changes don't feel so dramatic that they are suddenly out of budget from one year to the next.
Before: $425 hourly rate
After: $475 hourly rate

"Should I let my clients know?"

  • YES, IF.... you have a lot of recurring clients who need to build your service into their budget.
  • NO, IF.... your client turn over is high and you're constantly serving new clients each year.

"How do I tell them?"
When you're ready to put your new pricing into effect, make it a positive announcement and share any growth you've experienced over the last year as well as any ways that you've improved your service through education or received recognition through awards or publication.  People love working with businesses that are growing and it's far more attractive to stick with someone who is on an upswing in their business than someone who characterizes changes in terms of how costs are weighing down their business.  If you don't have any exciting growth, awards, or improvements to share, you can just serve up a short and simple gratitude sandwich like the example below....

Example: "We want to take this opportunity to thank you so much for your support and business over this last year.  We've attached a new rate sheet for your reference and are happy to answer any questions you have.  We love working with you and look forward to working with you even more in the year ahead!"

Anne Ruthmann is a professional photographer in New York City. With over 10 years of success as a full-time photographer in weddings, portraits, editorial, and now architecture and interiors, she spends any extra time she has helping others find smart solutions to business problems.  Stay in touch on Instagram, Twitter or Facebook.