There are lots of reasons to review and increase your prices on a regular interval. Many creative business owners find it difficult how to approach this topic, but in the business world it is fairly normal that prices or fees increase or change.
What is really important is that you tell your clients in advance if you are planning to increase your prices.
People want to be able to trust you, and like the truth, so tell them! Give them reasonable notice, so they can make a choice. You might even get some more clients, as raising prices is a great excuse to get in to contact again with previous clients!
What is your reason to raise your price?
You don’t need to have a reason! But your clients might want to know.
Simple, because you want to earn more (but be aware that if you charge too much your profitability will actually go down! Becoming more efficient and create more in a shorter period of time might actually have a similar effect on your longer term profitability as raising your prices)
Your costs have gone up. Due to the current economic conditions and annual inflation everybody is increasing their prices. Your material (for example the price of gold!) or travel costs might have increased dramatically and need to be carried over (more) to the client. January is normally a month when companies increase their price.
You want to reposition yourself or work with a different target market that enables you to charge more.
You are busy (or not) and overbooked, but especially want to work less hours but earn the same or a higher annual salary.
You have increased your credibility, done more training, got more experience, have worked for a while, have improved your brand or website.
Don’t be afraid to increase your price as it might have less effect on your sales than you expect. Very few people buy crafts or design purely on price alone.
How to introduce new prices?
Firstly, as said above, let your existing clients know in advance.
It is far easier to increase your prices if you provide a service than a product, as they are less comparable with each other. In fact, if you provide a service you might not even state your prices (on your website or brochure), as you want people to contact you to discuss their specific requirements and provide a specific quote. Unless your service is a very specific programme with specific features that clients always get as part of a package you will not need to provide a fixed price (and therefore it is easier to increase it).
If you increase your prices of your product or your hourly rate then do this by a percentage, and introduce in the first instance to new clients. If you want to you can give a reason, but you don’t need to – be confident about it that you are worth it!
If you introduce new services or products it is easier to introduce them at a higher rate from the beginning. So repackage products or services in a slightly different way and give them a new higher price. Discount older stock so that there is less comparability, which will decrease the chances of somebody asking about your price change.
Be confident about your work and the value that you add to that specific client, and you will be able to charge the price that you are worth!
Have you recently increased your prices? What happened? Please share your story here below.
Years ago I was faced with a choice either charge more or go out of business.
I was fearful of raising my prices because I thought that this would stop people from buying. But (as the bank pointed out when they refused my loan application- you don’t have a business if you need us to subsidise your customers) as I really had no alternative I decided to bite the bullet and see.
I doubled my prices overnight, and had to wait for 2 days before my next enquiry came my way.
All the time I was talking to the customer I knew I would have to give them an estimate… When the time came and I casually said it would be about £200.00 (twice my “normal” rate) I was delighted to hear the customer say, “ok that’s about what I thought it would be, can you pop over and measure up?”
When I got off the phone I hit the roof!
When I came down I realised that I was still in business that I had been selling myself too cheaply, and that people will pay whatever you ask – if you explain the value to them properly. (i have put up my prices on many occasions since and not regretted it, and I am still in business)
My advice would be:
First add value to yourself by defining your u.s.p. (unique Selling Preposition) This will enable you to stand out from the crowd -so there is no competition. Be prepared to help customers understand why you are better than another, and always remember people buy from people, if you believe in your own worth then so will others.
Most creative people love what they do so much they would give it away.
Be different sell it. This will add value to you and your customer.
Matthew Lloyd-Winder
Stained glass studio
I had a lesson about this early in my career that really helped me to think about pricing differently. I worked for a company that made financial software, and after five years and major upgrades (including a switch from DOS to windows and a quadrupling of the amount of data) we’d never raised the price of our flagship product–so when we finally decided to do it we had to double the price. The customer support team freaked out! They were positive the new price was too expensive, was unfair to the innocent customers who would now be unable to afford it, that we were going to lose half our subscribers.
The division head heard out all their concerns, and this was her response: “If we lose half our subscribers, I’ll be ecstatic. We’ll have the exact same revenue and our fulfillment costs will be cut in half.” It was a memorable lesson in the calculus that goes into pricing: more sales is not always better, and sales have costs associated with them as well as bringing in income.
(In the end we didn’t lose anything close to half our subscribers. There was a small drop followed by exponential growth of the product in the next few years–possibly helped by the new price and its effect on the product’s perceived value.)
I think about this a lot now, as I work through my own issues with pricing. When I’m tempted to lowball an estimate I remind myself that the more I charge, the fewer clients I need to make the same income–and if I double my rates anything less than a 50% drop in my business is a bonus. Making sure I reach potential customers who can pay a higher rate is a key part of that, obviously, so I try to focus my energy in that direction rather than using it to worry that my prices are too high for some people.
Hi Diana
Thanks for sharing. Pricing is a very interesting topic indeed, and you constantly will need to learn and adapt.
An excellent and interesting article, thanks.
When I first started out, my prices were quite low and I had plenty of sales but made no profit. I was OK with this as it was a learning curve but as time went along, I increased the price to what I thought was acceptable. Still people bought but the profit only covered my costs and I was working for nothing. I have since increased the prices again to a level where I’m actually making a small profit after all costs have been taken into account.
Many artists undervalue their work, which then makes it difficult for others making similar to compete. Also, the importation of products from the Far East causes problems with many handmade items as the labour is so cheap compared to the West.
Hi Patricia, great advice. Particularly wanted to highlight Diana’s comment about the relationship between price, cost, profit and position. I’m working with a few makers at the moment who are looking to re-position themselves and therefore planning a price hike in the new year.
I think it’s important to be bold and accept the fact that sometimes, price increases will lead to loss of customers, but the additional profits you’ll reap from the one’s that stay, and the new customers you may reach should more than balance this out.
As most of us are operating in niche markets, value based pricing is usually the most appropriate approach so its all about positioning yourself correctly and clearly communicating your brand story/USP to communicate value to the right customers.
Hi Ellen
Thanks for your additional comments. The link between price and positioning is crucial: if you are too cheap or too expensive you will not sell.
Having the right price for your product or service in combination with the right targeted and personalised marketing is essential to survive as a designer or maker.