Mar
20

How MSPs Can Raise Prices Without Losing Customers

How MSPs Can Raise Prices Without Losing Customers

March 20
By

Nobody likes price increases. However, if you have not raised the prices lately, there is a good chance you are undercharging for the services you provide. Some MSPs never raise their prices due to the fear they will lose or upset a customer. You may very well do that. But if you follow a few best practices, you will find that your best customers will understand the reasons behind the price increase and root for your success.

Road sign with the phrase "rising prices ahead" on it.

Let us look a few ways you can keep customers satisfied while raising prices. Keep in mind that anytime you raise prices, you risk losing a customer that shops on price alone. You may find letting go of these clients and replacing them with loyal customers is a better long-term strategy.

Small and Frequent

You should never be afraid to raise prices. By not raising prices, you are effectively accepting less money for your services each year, even with low levels of inflation. The question of how to raise prices often comes down to two options:

  • Larger but less frequent price increases
  • Smaller but more frequent price increases

When possible, train your customers to expect smaller but frequent – perhaps annually – price increases. Smaller increases are more palatable, and the higher frequency allows you to realize higher revenue earlier in relationship or contract.

Your loyal customers will appreciate the value you bring to their business and will not mind when you emphasize how much the relationship means to your company.

Focus on Value

dictionary with the word "value" being highlighted

We all want to work with the most loyal clients who appreciate our work and always pay us on time. But the fact is some clients shop on price alone and may not value the extra services touches you provide. They selected your MSP based on price, and when you raise prices, they threaten to flee to a competitor. This is not the time to back down or make apologies.

This type of customer requires special care, and you will have to decide if the extra work is worth the hassle. One strategy to take with this customer is to focus on value. Start with the following:

  • Explain how much time your services save them
  • Show them how much money they will save by working with you
  • Detail the pain they will experience without your help

When faced with the facts, even the most miserly customers will usually accept a price increase. Remain positive, stick to your decision, and focus on the value you provide. And even if you’ve done all that, you still might lose a customer who values lowest prices over service. It won’t be easy to let them go but focusing your energy on loyal customers who appreciate your services is a better plan.

Know Your Limits

Once you decide to raise prices, you need to figure out how much of an increase to ask for. This is not as simple as it sounds.

How much should you raise prices? In short, raise them until someone pushes back.

If you have been providing exceptional service, do not be surprised when customers accept your new rates without any pushback. When you begin to receive pushback, take note of where the pushback is coming from. Is it your rate or your retainer or something else? Knowing where that line is will help guide you to those areas of your business your customers value most. Start with those services when raising prices.

Be Honest

Handwritten text Always Be Honest with fountain pen on notebook. Concept image with copy space available.

Taking an honest approach to price increases is the only way to go. Do not try to hide them. Do not attempt to sneak a price hike into a contract or work order assuming nobody will notice.

The best approach is to be upfront with each customer. Give them a 60 or 90-day notice that explains your plan to raise prices at the end of the contract. That gives you both time to negotiate and resolve any concerns.

Thank each customer and make them understand how much you value their business and the relationship. They want you to succeed because their success is tied to yours. Focus on the expertise and skill you bring to their company. An honest approach will deepen the trust between your business and theirs.

Conclusion

You should never feel the need to apologize when raising prices. You have a business to run and understand where your financials need to be to succeed. Raising prices can be a scary experience, especially if you have not done so in a few years.

But as you add more skills and develop your business, you are worth more. Most customers will accept the increase when they understand that higher price means you are in a better position to serve them.