Raising prices sounds great–in the abstract. But when it actually comes time for a rate hike, what business owner hasn’t broken out into a cold sweat?
- Will we price ourselves out of the market?
- What will our existing customers think?
- What if this ends up costing us revenue instead of raising it?
These questions are important, and each deserves its own bit of scientific attention. In this post, however, I'm not going to talk about pricing strategy per se. What I am going to talk about is how you can use customer success to “sell” a price increase to your customers.
Getting your Mind Right
First things first.
When it comes to convincing existing and prospective customers why they should pay more for your product or service, the battle starts between your ears.
Start by convincing yourself of why a price hike is vital to your success.
If your business is going to thrive, you're going to have to revisit and reassess your worth constantly.
Keep this in mind: a 5% increase in price can lead to a 22% increase in operating profit.
Because price hikes have a winnowing effect. When you raise prices, your wishy-washy customers fall by the wayside. Those customers who recognize your value, on the other hand, will be glad to shell out a few extra bucks, because they know you're worth it.
This leaves you with a high-quality pool of customers who churn less and exhibit a higher average LTV.
Next: fight your fear with value.
Once you’re convinced that raising prices is the right move for you, it’s time to start silencing those voices in your head telling you your customers are going to get angry.
Here’s the truth: some of your customers will get mad.
But consider it from this angle.
Every day you’re in business, you’re learning something new. You’re experiencing wins, learning from failures and pouring time and money into making your products better with every iteration.
In other words, you're constantly increasing the value of your product.
If you continue to do that over time without raising prices accordingly, you'll effectively discount your product with every iteration.
Fair for the customer and for you.
Don’t forget that.
Customer Success is the Lynch Pin
Once you’ve sold your price hike to yourself, it’s time to sell it to your customers. Here’s where customer success can play an important role before, during and after the increase.
As I suggested above, businesses that last will always work to make their products and services more valuable to the customer.
At a minimum, this means taking customer feedback and injecting it into every layer of the product development process. As products evolve to meet the concrete needs of real customers, these products’ intrinsic value will climb steadily.
By facilitating the connection between customers and developers, your CS team members effectively set the stage for improving value. The better the connection is, the better (and more valuable) your product will become.
Communicating value goes both ways. As your products improve, your CS team will be constantly working with customers to show them how to gain more value and achieve more success.
This doesn’t work, of course, if your customer success operation is nothing more than a few customer support reps firing back emails every 48 hours.
If on the other hand, your customer success folks regularly connect with customers and focus on helping them win, they’ll be far more likely to stick with your product when a price increase is announced.
Once a price increase hits, it’s on you to continually justify the product’s value at its new price. If customers feel like you’ve outkicked your coverage, they’ll churn.
As you cross the threshold from bargain service to premium product, it’s up to your customer success team to keep folks from churning and going to one of your still-low-priced competitors.
As you climb from bargain basement to premium pricing, your CS team will play a front-line role in making this case over and over again. Deploy them wisely.
Don’t be afraid to raise your prices. If you have a quality product that’s helping customers succeed, then there’s no shame in charging what it’s truly worth.
When you do decide it’s time for a rate hike, lean on your customer success team to make the case to customers. You’ll be surprised just how effective they can be.