The Difficulty In Raising Rates

Something we’ve found a little challenging is how to increase rates for our older clients. New customers don’t really have an issue with our current rates and value proposition, but we have several clients that have been with us for years who pay lower rates.  

There are two main schools of thought when it comes to this: standardized pricing for everyone across the board or grandfather in older clients with lower rates. We have chosen to grandfather in older clients, and there are a couple of benefits to doing so.  One, it rewards loyalty for those who have been with us for awhile. Two, we avoid issues that might come up from moving to higher rates. This matters because in some cases we have raised rates substantially to coincide with the value proposition we now offer.

What we do instead is implement minor yearly increases to those who have been with us for at least 12 months. Our minimum commitment terms are 12 months so we look at anyone who has fulfilled their minimum commitment and assess a slight increase. This is easier to justify and helps close the gap between some of the old and new rates.

We have a process in place to look at who needs an increase at the end of the year.  Last year we started off a bit late and ran into some minor issues when trying to implement new rates with not a lot of notice.  This year we will begin that process in September, giving the account manager plenty of time to call their clients and give them a heads up before they receive their letter.

Erik recommends you decide how to handle legacy clients, and put a process in place for how you will raise rates when the time comes.