Reasons for writing a price increase letter
There are various reasons why you would choose to increase your prices and the choice to do this varies from one business to another. Increasing prices will depend on several factors. It’s necessary to constantly review your prices, your services, and the competition so you can effectively decide if your business would benefit from such a rate increase.
Do this before you even think about composing a rate increase letter. One of the main reasons why companies decide to increase rates is that they want to deviate from what’s known as time-based pricing. It’s logical that as your skills improve, you can accomplish your client’s demands faster. Here are the most common reasons why you may decide to increase your prices:
- There’s an increase in the cost-of-doing-business. This may include increases in rent and the rates of contractors. Increasing your rates will allow you to pass the costs to your clients.
- There’s an increase in business, and it becomes more than you’re able to handle. If you’re good in your business, you will always be in demand. Because of this, you may consider composing a letter to customers about the price increase. This will allow you to lighten your load as you will concentrate on doing great work for selected clients.
- Through experience, you have honed your skills, and you can offer service of a higher quality. Increasing your rates will reflect that.
- Changing your price structure will better show the value that you will provide to your clients rather than how much time you spend on doing the work for them.
- You want your business to expand, and you set more personal goals. To achieve this, you will require more revenue.
- When you discover that you’re underpriced for your services in your business’ market, you would want to align yourself with the competition.
- You finally want to dispose of clients who argue about every cent they pay you. Raising your prices and modifying the way that you structure your services may push them to search for the same services elsewhere.
- You aim to offer a personalized service or target a specific type of market segment that operates at a higher price point.
- Overwork and budget constraints can lead to stress and resentment. Many businesses can attest that raising their prices can have an instant positive effect on their levels of stress.
The benefit of writing a price increase letter
After figuring out your new service offerings and how you will structure your new rates, it’s time to inform your clients about the “good” news. This is a very delicate issue, especially if you have a small business. Just the thought of your clients leaving you can be very scary as it might leave you broke.
However, this situation is farther than the truth. Most clients understand and will accept that the increase in prices is a normal aspect of the business cycle. You may even find that some of these clients might reprimand you for keeping your prices low for such a long time!
If you’re still worried, what you can do is stagger your price increase notices to minimize any falling out that may arise. You don’t have to do them all at once. Start with a small group of customers and once they’ve moved, start with a new one.
Many firms usually start the new rates on new clients and gradually roll the increase to their previous clients when their existing packages expire. There will be an increase in the flow of available cash enough to enable you to implement the change slowly and deal with any resulting deficits. No matter what method you use, a price increase letter will be highly beneficial for you.
Writing a superb price increase letter
Many companies follow the aforementioned advice. However, some prefer to drop the ball all at once instead of letting it roll across the finish line. Many of us have experienced receiving a bill that has increased by so much without prior notifications.
The inflated bills can get us angry and could only make us feel that these businesses don’t have empathy or transparency with their clients. Clients will absorb an increase in rate prices if you notify them through a price increase letter template well in advance.
Studies conducted have indicated that any price rise is a lot fairer when the company communicates the change directly. How much explaining for the increase will depend upon the significance of the price increase. Simply said, a small price increase won’t need many clarifications, but a big increase should include a lot of details in the letter to customers about the price increase.
You need to make plenty of detailed deliberations regarding every aspect of the communication involving price changes. It’s recommended to send a rate increase letter to clients via email about six months in advance. This transparency and empathy will give the clients all the data they need to make an informed decision.
Here are some points which can help identify how to raise your prices and compose a superb price increase letter. Planning ahead is an important factor as you can increase the likelihood of getting positive results for everyone radically, especially your clients:
- A clear, detailed structure
There should always be a balance between the maximization of the value given to clients and maintaining the momentum of your company. These two factors might not be mutually exclusive, but with an appropriate pricing structure, they will require a complex and calculation that’s ever-changing and derived from their constant analysis.
- Consider the underlying analytics
There should always be a team who will constantly assess packaging and pricing options based on the previously mentioned balance. While still in the testing phase, the team should concentrate on two clear indicators which often contrast with each other namely:
price sensitivity data
the data which demonstrates the intention of delivering the market’s strongest price-performance ratio
- Practice thoroughness
Running several tests to pinpoint the appropriate pricing and packaging mix of customers is a regular business practice. There are about a dozen or fewer employees on all departments of the organization that contribute to any change from the primary analysis to the customer communication. Take everything seriously and meticulously as it should be.
Tips for writing your price increase letter
There’s always a certain amount of apprehension when sending a price increase letter template to your existing customers. However, more often than not, it’s unlikely that you will lose customers just because of a modest price increase. Always focus on the value added instead of merely justifying your increase.
For those favored and valuable customers, it’s recommended to issue them temporary extensions of the current rates. When writing your price increase notice, keep these in mind:
- Keep your letter direct and simple
Remember that the time of both you and your client is very valuable so never beat around the bush. A good letter should have a brief salutation, the statement of your intent to increase your rates by a specific amount starting on a specified date. Then add a statement where you thank your clients for their business. That’s all that is really needed.
- Give a justification for the price increase
Justify your increase with a simple phrase but don’t spend too much time on it. Again, use simple sentences which are direct to the point. There’s no need for sad stories. One way you may want to employ when increasing your rate is by adding more value to the services you offer. This will soften the impact of any rate change.
You can increase your rates because your services or products have already improved in terms of their quality. Then interject how some new product features can further benefit the customers like learning and applying new skills or providing some extra service. You can include this information in the letter.
- Provide your clients with a lot of notices about the price increase
It’s a good idea to give your client several notices before you send the price increase letter. Rate increases aren’t uncommon in business companies but many departments may require more time to ask for an increased budget or may require approval from the management to pay higher prices to service providers.
Give your clients a few months’ notice before sending them your planned rate increase. For valued customers who you do plenty of work for, afford them an extension on the planned increase.
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