rate increase dilemna

[wishnuwelltoo]

Could someone provide me with some guidance as to how I should handle this dilemna? I have never raised my prices in 5 years, but now I am going to be sharing an office in addition to working out of my home and as all expenses keep going up, I need to get with the going rate here. I am drafting a letter to my existing clients telling them that Jan. 1 the rate is going up. The problem is that I am offering a 20% off gift certificates promotion until 12/23. How do I control how many they buy at the old rate to keep their costs down in the new year? Not everyone will do this, but last year a few bought multiple certificates that held them over 1/2 year into the new year. This will cut into my bottomline for many months to come if it gets out of hand. Do I mail the letter first telling of the increase or the postcard with the discount. Too close together will seem strange, but they need the notice of the price increase with some lead time too. Sorry to go on so long.....

 

[Lovely Laura]

Might be to late for this but someone here suggested rate increases in November to prevent selling GC's at the old price.

 

[shesxchaotic]

Increasing your rates should not be about your costs going up. That is your decision and your problem, not your clients'. Are your clients getting a better experience because of the move/change of venue? ARe you changing your service menu? No one working at the local supermarket gets a raise because they decided to spend more on housing, car or clothing.

Increasing prices because you have not done so in 5 years is a different story. That is something clients can relate to and is long overdue. In some respects, tying your increase to your new location overrides the fact you have not raised your rates -- everyone will associate it with the new location and if the experience is not enhanced, they might not think the increase is warranted.

You should not try to limit what people will buy. If you worry that they will stop coming once the cheap GCs run out, then you are better off getting what revenue you can out of the GCs, hope they don't redeem them all, or - better yet - hope that after their continued visits they will think you are worth the price increase.

 

[Sam]

Why shouldn't someone increase their fee's because supply costs have risen? The cost of heating/ac a building is higher, supplies, laundry, ect??

 

[[email protected]]

People working at the local supermarket don't get a raise when they decide to buy a new car or clothing because that has nothing to do with the goods customers can buy at the grocery store. That is their own personal choice, it's not their "cost."

The grocery store may raise the prices of their goods as transportation costs rise to get the goods to the store, or when minimum wage goes up. And I think THAT is what blissfullbalance is talking about.

If you are truly concerned about not making enough money, then just put a cap on the number of GCs they can buy. When a store has a sale frequently the ad will say "Limit: 5 per customer." You can put that on the postcard you send out that advertises the 20% off promotion.

Or, you could not do the promotion. I'm not sure if you've started the promotion yet. But you could do a different promotion, like "Buy 3 gift certificates, get an extra 30 minutes on your next massage!" or something adding value, not giving a $$ discount.

 

[Molly Holly is a Hottie.]

Why shouldn't someone increase their fee's because supply costs have risen? The cost of heating/ac a building is higher, supplies, laundry, ect??

you are mixing apples and oranges = variable costs being apples and fixed costs being oranges.

When direct or variable costs - inputs directly attributable to each unit of goods or services sold = materials and labor - go up, prices go up. You start using organic shea butter instead of biotone, up your rates. You trade in the portable table for a heated, hydraulic one -- that is worth something.

When fixed costs increase - cost indirectly associated with what is sold = rent, advertising, utilities etc - businesses make up for it by doing more volume. Trying to do so otherwise will drive you and your clients crazy -- this month you did half as many massages as last month, so your "cost of rent per massage" doubles, so you raise your prices accordingly?

If her costs are going up because now she has the expense of sharing an office - that is a choice. As I stated before, if the office experience is superior to the home office experience, then there is no issue. You are getting more for your money and should charge differentially.

But if the at-home clients are paying more for the same service because now she is renting an office to work out of 2 or 3 days a week, where is the sense in that?

If the perception - and perception is reality - is that prices were raised for at-home because she now has rent elsewhere to cover, there is likely to be a negative reaction.

As we have often seen, and as I strongly support, reasonable price increases over time are accepted by clients. "ABout time" is a more common response than "How much?!?!?!"

 

[PebblesBee2]

Thanks for all of your views on this issue. I guess my timing is off on this. I have been meaning to send a letter announcing a rate increase for months now, but just recently found this extra location. The increase has more to do with the fact that my rates have been constant for 5 years, even though I have spent a lot on cont. ed, national cert. and just having 5 more years of experience than when I started in this field. I guess I better wait a few more months so that I don't cause any negative feelings about it being tied to the move.

 

[Samira S]

You say you're keeping the home business. Are your existing home clients staying home clients or are you trying to get them to see you at the clinic? Do you need to even tell your existing home clients that there is a clinic?

How about clinic is one rate, home is another, home clients that shift to the clinic get home rates while they rebook before they leave. Eventually you can up the home rates. Gift certificates are all one rate - the clinic rate because you want them redeemed at the clinic? Or home rate because you want them redeemed at home? Or offer the 2 different prices.

I don't offer any discounts on gift certificates - you're prioviding 2 services - the one for the buyer and the one for the person that eventually uses the certificate. Doesn't make sense to me why you would discount the additional work a gift certificate causes. Cash discounts can affect your ability to be able to pay bills, if you are busy enough not to worry about bills, cash discounts are fine, but if you worry about bills (and it sounds like you are), it means you are busy enough to be able to offer incentives some other way than money, eg upgraded service (extra time, hot stones, hot towels, whatever) How much did you spend on the postcards? Can you throw them out and rephrase them?

 

[Alelvehes]

Thank you Melb for the insightful reply. I think it is a good idea to have home and clinic prices. My home clients will probably all stay at that location anyway. The clinic clients will be newer ones from the chiropractors or other sources. I guess I was trying to streamline a price structure since I do have various prices going now (home clients, chiro patients as set forth by the chiroprator's office, clients from my office in a small town nearby to match local prices). It all gets a little confusing and I had hoped to make it easier for my tax person too. I appreciate your ideas and will implement them.