Tips for gracefully raising service prices – DSP 03

Today’s episodes focuses on a tough topic — raising prices.

Graham & Ashkahn discuss how, while this can be a tough thing to think about and put into place for your business, you needn’t be afraid. If you genuinely need to raise your prices because expenses are going up or you want to pay your staff more, you’ll be surprised how much your customers will understand.

Blog: How to compete on price without slashing prices

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Transcription of this episode… (in case you prefer reading)

Graham: Today’s question is, “I think I need to raise my prices but I’m scared of losing customers, any tips?”

Ashkahn: Okay, yeah, that’s a scary thing raising your price, I don’t blame you.

Graham: So you’re right, you should be terrified, it’s a nerve-racking thing going through and raising your prices.

Ashkahn: Yeah, good, alright. Glad we answered that one.

Graham: Yep, alright see you next week… Seriously though, so we’ve gone through price raises ourselves at Float On.

Ashkahn: Twice now.

Graham: And we’re probably coming up on a third so this one is also actually fresh on our minds as well. And I assume that what you’re scared of is losing customers because the prices went up.

Ashkahn: Yeah.

Graham: Every price raise that we’ve done, we get some emails from people who say, “Oh, I was really enjoying your spot but I don’t think I can pay these new prices.” So that’s a very valid concern, however I will say that the number of those responses that we got is not that many.

Ashkahn: Yeah, so far it hasn’t been.

Graham: Again, coming up on a price raise ourselves, we’re also terrified so you might have heard that in Ashkahn’s voice just now. In fact, even after raising our prices we have not seen any kind of significant drop in attendance so far. I guess we should say we initially started with charging $40 for ninety-minute floats.

Ashkahn: Yeah, long time ago.

Graham: Long time ago.

Ashkahn: 2010, we’d just opened.

Graham: And that lasted for about three months and we realized that that was not going to actually pay the bills so we raised it up to $50.

Ashkahn: And that lasted quite a while, right? So we were $50 until 2015, yeah?

Graham: So another like four years or so?

Ashkahn: End of 2015, four and a half years?

Graham: Somewhere around there. And we raised it up from $50 to $65. So that’s the last price raise that we’ve actually done so far and that one we pulled off really well. So we can definitely give you some tips that worked for us from that one.

So one of the things that I like doing is actually explaining why you’re raising your prices. I think a lot of people would assume that you’re raising your prices just to kinda make more money on an already profitable business and, lots of times when float centers are considering raising their prices, it’s because they’re not making ends meet as much as they wanted or because salt destroys way more things than they thought it was going to and the amount of repairs you have to do is higher than you expected or you wanna raise the salaries on your staff members or whatever it is oftentimes it’s not just, we’re being greedy and we want to extract even more money from our customers, right? So some way to explain that is good.

Ashkahn: Yeah, definitely. And we’ve done that both times and that’s always been met very warmly from people who’ve read it. I think it really does put people on our side somehow, you know, they’re like, “Ah man.” One of our things was we had no idea how much laundry we had to do. We spent so much money on laundry. And people were like emailing us things like, “That’s crazy man yeah, laundry sounds totally nuts.”

Graham: What we do, we let people know a little in advance to, right? So we give people a heads up that we’re going to be raising our prices on a certain day and usually we’ll let people know you know a good month, month and a half even a couple of months in advance maybe our members a little bit sooner than that. And that gives people a chance to A) come to terms with it and understand that the price isn’t just going up immediately.

Ashkahn: Right.

Graham: And B) for you to run some kind of discount or special or grandfather members in or whatever you’re going to do kind of leading up to that point as well. So kind of encouraging people to get cheap floats while they can.

Ashkahn: Yeah. And really that even swings into kind of encouraging a lot of float sales and especially membership sales. That was one of the things that worked really well for us. We announced our price raise and very clearly said that any memberships purchased before that date will continue at their existing price and not only did that make a bunch of people buy memberships but also those people who then had those memberships were way less likely to cancel them then our normal members are because they felt like they’d be losing their kind of awesome grandfathered in membership rate.

Graham: Yeah, we’re actually in the process of doing our last price raise we actually added on about 65, 70 members during the process just for grandfathering them in. So there is an upside, which is, it can be really nice encouragement for people to get memberships and also what we do is we force people to keep their membership if they wanna keep their grandfathered rate. So it was actually for us a good way to get members that stick around to, we actually still have members who are still on that same deal because they don’t wanna let it go and have to pay new membership if they redo it.

Ashkahn: And we’re nice to people, if they need to pause it for like a month or two we’re not like, “You’re out.”

Graham: That’s right,  they just have to slip us a little hundy over the counter and we’ll take care of them, haha.

Ashkahn: Haha, yeah. Last time we did it, we also lined it up with holiday season, and it was kind of like a double duty discount we were doing.

Graham: The triple Ds huh.

Ashkahn: Triple D, yeah. And the trademark is coming on that one here. The triple D that we did was we usually give some sort of discount in December on gift cards as well and it kind of served this function of also making a really nice affordable way for people to get floats. So I guess, customers know our prices are rising but, guess what, for the next month they can pay even less than our normal prices if they wanna like stock up on floats.

Graham: Yeah, I’d say the full path that worked really well for us was planning it around that discount season and basically saying, “Okay, it’s beginning of October we’re just letting people know that we’re going to be raising our prices at the beginning of December.” And then we hit December and we’re like, “Okay, your prices are raised but we’re also doing discounted floats for the entire month.” So there’s a month where the prices have already gone up, where people are still able to get them at this discounted rate and then January rolls around and now it’s back up to the new full price but I think because you kinda did this staged roll out of gathering awareness and making people know, then raising the prices at the same time they can still get cheap floats and then that just transitions into, “Okay now prices are a little higher.” It’s like it seems nicer than again just one day springing all of a sudden, “Okay, we’re charging $80 for floats now.”

Ashkahn: Yeah and I mean I think the general lesson, too,  is just be super nice to people, you know we were like very generous in terms of those that price raise. Like if someone wanted to buy a membership and it was a week after we raised our prices and they asked us if they could get in under that old price, we would let them, you know it was that we just were as flexible as we could be to kind of remove that pain-point. Because it doesn’t last that long. There’s really only so much time that people were like trying to squeeze in that old price or get a deal, like you know we’re taking like a few weeks to a month before you’re kind of in that overlap zone so just deciding to be nice for that period of time, I think, helps kind of ease that transition.

Graham: For sure, if you do get emails coming in from people who are upset about the price raise and say, “Hey, I really enjoyed coming in, I don’t think I can afford it at the new price.” Like reach out to them and just offer them, it’s like, “Hey, well, we can’t do this forever but you know for the next month or whatever feel free to stock up on as many floats as you want to that old price like I appreciate that you’re a regular customer and we want to take care of you but we need to make ends meet.

Ashkahn: And that’s nice —  we talk about discounts a lot on this show and…

Graham: …and how we don’t like them.

Ashkahn: Yeah, how we don’t like them, and how they need to be justified ideally is: the best way to do a discount (and this is just a great built-in justification), like everybody understands they’re not gonna be able to contact you in a year and be like, “Hey, can I still get your old price of floats?” It has this very built-in kind of logic to why they’re getting a discount for this particular moment in time and why they won’t be getting in the future.

Graham: I guess the last thing that worked really well for us — this is kind of going back around to the very first piece of advice we gave you — when you’re giving people all these details and letting them know that you’re raising your price, you really don’t wanna sound like you’re just making excuses for yourself by writing a giant explanation in your price raise email saying exactly why you need to do it, and we found it was really beneficial to us to actually make a webpage on our site that detailed the reasons we were doing the price raise.

And it was probably about a page and a half long of actually just sort of a letter to our customers and our members saying, “Hey, we wish we could give floats away for free all the time you know like we don’t even wanna charge money but we need to because of these reasons.” And then when we sent an email we just let people know, “Hey there’s this price raise coming, if you wanna read more about the reasons behind it, click here and view our website.” And that’s a really nice way to get all that information out there without just again seeming like you’re making excuses or bombarding them with all of these reasons in what should be a relatively brief email.

Ashkahn: Right, and I guess let’s talk about the email a little bit, too, because what we did not do was email our full customer list or anything. We didn’t send an email out to everyone who’s ever floated with us. I mean one, because you don’t want to do that, because there’s probably a lot of people who are never gonna come back to float and you just say, “Okay, guess what? Things are slightly worse for you now.” Like it’s not a fun email to send out but what we did do is email our mailing list specifically the people who had actually kind of opted in to hear from us. So that and I think we posted some stuff on social media.

Graham: Yeah, just a little bit might even have been linking back to that webpage and then also emailing of course our members.

Ashkahn: Right.

Graham: And letting them know that something’s coming up because I mean really that’s like kind of a nice thing for members it’s like, “Hey, you get to keep this member price even though our prices are going up.”

Ashkahn: Right.

Graham: So hopefully that’s not bad news for them.

Ashkahn: Yeah.

Graham: I think that’s about it, again yeah I think you’re totally right to be terrified it’s a very scary thing but, if you put the right amount of thought going into it, and then hopefully, if you go into it like with this idea that you need to do it and trying to get customers on your side, hopefully it works out really well for you.

Ashkahn: Yeah, and for us it did, you know we honestly got emails back from customers saying they’re happy for us, being like, “Good for you for raising your prices, it sounds like your business need it.” A huge amount of positive feedback came from us presenting this price raise in that way.

Graham: Which is so unexpected. I mean we got more compliments on us raising our prices and people feeling good for us than we did complaints, which totally blew my mind so maybe that puts you at ease a little bit.

Ashkahn: Yeah, so we’re gonna bump it up to $1,000 a float now and see how many compliments we can get.

Graham: It’s gone well every time in the past, right? Why put a limit on it?

Ashkahn: That seems like it makes sense.

Graham: Alright, and that is today’s solution.

Ashkahn: We’ll see you guys tomorrow.

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