Episode 349: How To Increase Your Prices Without Losing Any Customers
As a business owner, one of the most challenging decisions you may face is when and how to increase your prices. It’s a controversial topic, but it’s essential for the growth and sustainability of your business.
In this edition of #AskAdam, Adam and Charlie discuss the controversial topic of raising prices for existing clients. They emphasize the importance of adjusting prices to account for inflation, increased costs, and changes in the economy. Adam shares his philosophy of rewarding loyalty by keeping prices the same for existing clients while increasing the value they receive.
Show Highlights:
- Many businesses undercharge and fail to adjust their prices
- Business owners should regularly evaluate their pricing strategy and consider raising prices to maintain profitability
- The concept of market thresholds involves testing the market’s appetite for higher prices and adjusting accordingly
- Loyalty should be rewarded by keeping prices the same for existing clients while increasing the value they receive
- Increasing value is crucial when raising prices, as customers will be more willing to pay if they perceive the added value
Links Mentioned:
Get your Business Growth Secrets SUCCESS PLANNER for FREE and profit like a pro: https://adamstottplanner.com/free-book47315172
Adams website: https://adamstott.com/?el=Pod
Watch the Episode on Adam’s YouTube Channel: https://www.youtube.com/adamstottcoach?el=Pod
Connect with Adam on Instagram: https://www.instagram.com/adamstottcoach/?el=Pod
Join Adam’s network on LinkedIn: https://www.linkedin.com/in/adam-stott-coach/?el=Pod
Business owners: Monetise social media, get more clients, increase your following, and make more sales: https://socialmediamonetisation.com/unlockfb?el=Pod
Coaches, Consultants, and Speakers: lower your marketing costs, increase ticket prices, and get more high-ticket clients: https://personalbrandunlocked.com/fb-event-reg?el=Pod
Transcript:
Please note this is a verbatim transcription from the original audio and therefore may include some minor grammatical errors.
Adam Stott:
[00:00:00] Adam Stott: Hi, everybody. Welcome to another episode of Business Growth Secrets, the podcast. I’m here with Charlie from our marketing team, and he has been asking some epic questions from you. Epic. People that have been commenting and putting them in the comments. So if you have a business question or business challenge that you want to ask, go ahead, comment, put it in the chat, and we will be more than happy to help you with it.
[00:00:24] You know, what is this podcast all about? It’s all about. Helping business owners take their businesses from say six figures to seven figures How do we turn you into a million pound business owner using scaling strategies? That’s what it’s all about Take it away Charlie with your questions for today
[00:00:41] Charlie: So this one is that a lot of business owners come to us about come to you about Um, and it’s a bit of a controversial area, but it’s about putting their prices up.
[00:00:51] What is the, how do you go around that with your existing clients? When do you decide that the prices have to go up? Um, and what are the best strategies about, yeah, about having that conversation with them?
[00:01:03] Adam Stott: Okay. So lots of different aspects of the question. Let’s break it down. So the first part of when should you put your prices up for most businesses?
[00:01:12] Probably right now. Yeah, it’s an easy answer. Okay. And a lot of businesses under charge and a lot of people’s pricing strategies, what they do is they go, right, I need to figure out what my prices are for my business. So they go and they find somebody that does something similar to them and they match it, put it a little bit higher, a little bit lower, depending on where they’re at, you know, and they find two or three people and they go somewhere around that and that is their pricing strategy.
[00:01:37] And then they leave it like that for years
[00:01:40] Charlie: and
[00:01:40] Adam Stott: it’s crazy. When you look at what we’ve been going through in the economy over the past couple of years with inflation, um, inflation is going up and many people have not put their prices up, uh, but everything that they pay. So for imagine this for a moment, I just try and really get across to you.
[00:01:56] Imagine that we kept our prices the same continuously forever and we’re running a business and year one. Let’s say we run a business, year one, make a million quid, we sell, sell a million pounds worth of stuff. After we’ve paid for everything, we make a hundred thousand pound net in the business. So we’ve got ten percent profit, right?
[00:02:14] Million pounds, a hundred thousand. And then year two, um, we do the same thing, you know, million quid, a hundred thousand in profit. Year three, same thing. And then inflation changes in the UK and we don’t do anything about it. We don’t change our prices. And we sell a million pounds worth of stuff that’s just going down.
[00:02:32] But basically everything that we pay for has gone up in price. So we’ve still done a million pounds worth of sales, but instead of making a hundred thousand pounds because we’ve paid more for everything. Yeah, yeah. And all of a sudden we might only make 20,000 pounds. So we’ve worked the same amount of hours, the same amount of time, same amount of effort.
[00:02:51] We’re just making less money. Why? Because that’s what happens with inflation. When you pay more for everything else, your profitability is affected. So when I say why should business owners probably put their prices up, especially what we’ve just been through in the UK economy, um, business owners need to do that.
[00:03:08] And the reality is, it’s not just that. You know, inflation is one thing, but what we’ve also seen is we’ve seen corporation tax has increased from 19 percent to 25%. So at the end of the year on that a hundred thousand pounds, our business used to pay, you know, 19, 000 pounds in corporation tax and now paying 25.
[00:03:28] Yeah. So. You’re paying more for everything you buy. You’re paying more in tax. You know, and guess what’s also gone up? Minimum wage. So the employees that pay for you, they’ve gone up as well. So all of a sudden, your 100k is
[00:03:42] Charlie: shrinking. It’s really
[00:03:43] Adam Stott: shrinking. So business owners need to be commercial. They need to be smart.
[00:03:48] And they need to understand. And, and then they go, Ah, ah, ah, ah, ah, ah, I can’t put my prices up because my competitors are not. Well, the reality is, Your competitors are going to go out of business.
[00:03:59] Charlie: Yeah, yeah, yeah.
[00:04:00] Adam Stott: Because it’s not being
[00:04:01] Charlie: scared of your competitors when like you need to be more scared of losing money and going out of business itself.
[00:04:06] Yeah, you
[00:04:06] Adam Stott: do need to be more scared of your business being at risk than what your competitors are doing. So there’s a sharp wake up call to a few business owners that are watching and the actual reality. So this is how pricing works. I always remember I had a really, when I first started, um, coaching business, not even this business, when I first started coaching ever, I had a great coach at the time that I was working with, his name was Marco, and he talked to me about the concept of market thresholds.
[00:04:36] And what he said to me was, as I went out and I had a few people that really wanted to work with me and wanted me to coach them, and I was running other businesses, it wasn’t my main business, it isn’t what I wanted to do. But they were asking me, so I said, how much should he charge? He said, well, You know, charge as much as you possibly can.
[00:04:53] Yeah. And, uh, do ’em a great deal giving value. Yeah. So it goes, yeah. So the first thing I said is, okay. Yeah. I’ll, I’ll coach you. It’s a thousand pounds. Yeah. A thousand pounds a month. And the person I made that offer to said yes. Yeah,
[00:05:04] Charlie: yeah.
[00:05:04] Adam Stott: No problem. So I said, Marco, uh, yeah, I did what he said. I got great.
[00:05:08] Charged a thousand about a month. They, they’re happy. We’re getting great results. So what have you managed to do for their business? Well, when they started working with me, they were losing 10,000 pound a month. We’ve turned that around now, and now they’re making like. 8, 000 pound a month, so they’ve swung the whole profitability range.
[00:05:22] I was like, wow, well, they got a good deal, a grand, didn’t they? I went, Oh, I suppose they did. He said, well, yeah, you saved their business. He said, Oh, I said, well, what do I do? He said, well, the next person that wants it, you charge two and a half thousand. And what did like, I don’t know if I could charge that.
[00:05:39] So just do it. So I went out and the next person I charged two and a half thousand and they were like, oh, yeah great So I started working with them. I got them a great result and then I remember talking to Marco and I said Marco What do I charge now? He said charge five thousand.
[00:05:53] Charlie: Yeah
[00:05:54] Adam Stott: No, I couldn’t possibly do that.
[00:05:56] He’s like so I did and then he said yeah, and then they go Yeah, then charge 10, 000. I was like I can’t possibly charge 10, 000 pounds. Yeah, and he said and the lesson in this Of the stacking of the pricing is what I was doing was actually testing the market’s appetite. Yeah for the offer Right you go until someone says no and so yeah, essentially if everybody’s saying yes You’re too cheap.
[00:06:19] Now, when I did go 10, 000, people started losing their bottle when they didn’t go ahead, but then you know where it’s at. So I knew that the market threshold for that type of opportunity was that unless I changed client and then I went out and deal with American express and I’m consulting for them, 10, 000 is nothing for your average business owner.
[00:06:37] Yeah. It’s different. Right.
[00:06:38] Charlie: So. You know, you’re at the highest level, so you don’t have to worry about like, I mean, you already now know you’ve tested it that for that part of that moment in time, you’re at the top of that level. Absolutely. And that
[00:06:47] Adam Stott: is the, that is the concept of Of market thresholds and most business owners have never applied that to their business They’ve never seen the impact of that.
[00:06:58] They’re too afraid that people will say no So they’ve never increased their their prices consistently in order to do that So it’s something that I would definitely and I just gave extreme examples. Yeah. Yeah, but it might be that your restaurant Is currently charging 6. 99 for a meal and you yeah you could and you could charge 9.
[00:07:17] 99 and then people would say nothing and then you could charge 14. 99 and then they would say nothing
[00:07:24] Charlie: and
[00:07:24] Adam Stott: then you would charge 16. 99 and then they would say nothing and then people stop going into a restaurant because you because they think you start charging 20 things too expensive. You know, so you, you, you found your sweet spot and it’s always worth testing.
[00:07:39] And look, give you an example of how a restaurant could do that is maybe you don’t change your menu, but what you do is you put a special on for 20 and you see your order’s a special. And now you’ve got a little test going on as to is there an appetite to spend 20 in my restaurant for the special? And if there is, maybe the special now makes the menu.
[00:07:59] Yeah, yeah, yeah. And then it’s on a menu. Because you get another special. Yeah. But this
[00:08:02] Charlie: special is 22 pound. Yeah, yeah.
[00:08:04] Adam Stott: Exactly right. And then you’re, and then you’re building up, building up, building up. And you’re testing those market thresholds and it’s a, it’s a really good thing for business owners to do with their pricing.
[00:08:14] Uh, so if you go back to the, the question, you said pricing, how do they do it? Yeah, yeah, yeah. Um, I think we’ve, we’ve covered a couple of those aspects. Well, there’s more to it, Charlie. Yeah. Yeah.
[00:08:23] Charlie: It was, um, it was just about. So. With your, say if you’re a service based business and I don’t know, maybe you’re a life coach to someone and you’ve been charging them a certain amount of money all year, but now, you know, everything’s gone up, April’s come around and you want to start charging them more.
[00:08:36] What’s the sort of best way to go around that? Oh, so existing clients. Existing clients, yeah. Okay, yeah,
[00:08:41] Adam Stott: good, really good question. Yeah, yeah, yeah. So look, my, My philosophy on this and what I do is, is I always reward loyalty and I make that very clear. So for example, when we started gold circle in 2016, uh, the program for that mentoring program was around 7, 000 pounds around that per year.
[00:09:05] And the interesting thing is that that now is 16, 17, 000 pound program per year, but it’s not the same program as it was eight years ago. But there were people that joined me in 2016 And I’ve let them renew every year for their original price point now Why I appreciate loyalty.
[00:09:27] Charlie: Yeah
[00:09:27] Adam Stott: a reward loyalty.
[00:09:28] Charlie: Yeah,
[00:09:29] Adam Stott: and what that means is that person that came in in 2016 Well the difference between gold circle in 2016 And Gold Gold Circle in 2024.
[00:09:38] Charlie: Yeah.
[00:09:39] Adam Stott: Is that Gold Circle in 2024 has nine coaches in it. Yeah. You know, you don’t just get me, you get nine different coaches. Yeah. Gold Circle in 2024 has trainings every single day.
[00:09:50] Yeah. Uh, gold Circle in 2024 is live streamed around the world. Yeah. Gold Circle in 24 has, uh, marketing one-on-one coaching. It has Funnel one-on-one coaching CRM one-on-one Coaching has all this stuff, but in 2016 it didn’t have any of that. So I’m getting a few points across in this conversation. So first of all, I don’t increase pricing on existing clients I reward loyalty and secondly in and the second point of the conversation is in order to increase price You have to increase value.
[00:10:21] You have to increase value. Yeah, you picked up very well, right? You increase the value and and you can continue to increase the value and the more value you increase The more valuable that the product becomes to to the people and that’s why people people stay with us for years for the loyalty and New people get way more value than the person that came in originally and if anyone went well I’m paying I’m paying 20 grand for that and they pay or you know I’m paying 17 at the beginning and they and they paid seven and Well, they’re paid seven for eight years.
[00:10:50] Yeah, exactly. Right. Yeah. So they’re, they’ve paid 70,000. Yeah. And they’ve stayed loyal with you. Right. You know where Yeah. Yeah, yeah. Where, where you might only be in the program for a year or two. Right. So, so it’s slightly different. So I think that’s a way of giving everybody value. Yeah. And also it gives that mentality of first come first serve.
[00:11:06] And when I launch a new product, I always launch a new product at a low price point. And the reason I launch a product at a low price point is I want a lot of people to come on board, test the product, build the foundations, you know, and actually work with me through the process. And then. I will increase the price, you know, so the new people know they always get a great deal, right?
[00:11:27] Yeah, and that’s yeah. Yeah, which is there you go, which is good. Yeah. No
[00:11:31] Charlie: answer that perfectly and I think yeah It definitely makes sense, you know keeping the same price for those little customers And then I love what you said about the story of Marco like yeah testing the waters Can you always know you’re at you’re at that point?
[00:11:42] So the
[00:11:44] Adam Stott: strategy for the loyalty strategy is often referred to as grandfather pricing. And what that means is your grandfathered in, you were there at the beginning, you get to keep the pricing, all that. So just so people are aware that that’s kind of the philosophy and that’s the philosophy that I like to use with my clients to reward them for their loyalty.
[00:12:02] So I think to sum up from this episode is somebody who’s been listening, you probably need to increase your prices right now. Okay, you need to look at how your costs have gone up. And if you are worried about increasing your prices, ask yourself, how can I increase my value to the person that is buying the product or service?
[00:12:20] Because when you actually go and offer them that increased price, you’re not going to be worried about that. When you go, they now get this and they get this and they get this. So if you look at it in that way, increase pricing, increase value, look after and be loyal to your existing client base. Your existing client base should always get great deals.
[00:12:37] You should always look after them and that way people grow with you. Brilliant. I smashed it. There we go. Hopefully you’ve enjoyed that episode of business growth secrets and, and make sure to leave us a comment below. Perhaps there is a. specific topic that you want to discuss, that you want to hear about.
[00:12:54] Uh, perhaps there are some challenges that you’re facing in business right now and you need a little bit of help. Want to be here for you. Want to be your business growth partner in your business to help you through those steps. Uh, so tell us how you’re doing. Tell us what you’re enjoying. And I look forward to seeing you on the next episode of the podcast.
[00:13:12] Thanks everybody.