Price increases over time are inevitable due to inflation and rising costs. But there are nuances in how to announce a price increase to clients, the timing, and how to frame the change. Even the delicate choice of wording in a price increase letter to customers can be the difference in a happy customer and a churning customer.
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Sending a notice of price increase to clients is a subject every digital agency has to confront from time to time. There are a number of reasons to send a price increase announcement to customers, but this doesn’t make it easier to approach the subject. Announcing a price increase can put your business at risk for customer churn. However, if best practices are followed throughout the process, churn can be mitigated. This doesn’t mean you can’t expect to get some negative reactions from unhappy customers.
The justification for announcing a price increase to customers needs to be value-driven. Show and tell customers how they will receive more value with the upcoming changes. This could look like maintaining the quality of product or service customers are accustomed to or perhaps even increasing the quality of product or service. Sending out a notice of price increase always has to come with an explanation of how that change will increase the value your customers experience. If the price increase letter to customers is not value-driven, they with churn and find a similar product or service at a lower price.
When reminding customers of the value your business provides them, an explanation of why changes are happening would be appreciated. Don’t forget to show them current proof of performance as a baseline for what they can expect to improve from. What are the reasons for increasing product and services pricing? It could be supply issues, the economy, or agencies may be announcing a price increase because they:
- Need to meet rising software as a service (SaaS) fees (such as increased Google Workspace pricing)
- Are anticipating an upcoming recession and pushing for customer retention with longer contracts for existing clients to avoid paying increased prices
- Need to increase profits to meet inflation and increased labor costs
- Are expanding the services they offer, which means investing in new skills, employees and technologies
- Weren’t charging enough initially, perhaps because they were new and kept prices low to win their first customers
- Found out competitors are charging more for similar services
- Are exceeding clients’ expectations substantially
- Are putting more capital into research and development or product improvements
- Increased their team size significantly, thus providing more value to customers over shorter periods of time
Regardless of the reason, raising fees is a sensitive topic to breach with clients. In this blog, we examine key considerations before you announce a price increase to clients and best practices in the delivery of how to announce a price increase to clients. We’ll also provide you with a template of the perfect price increase letter to customers for your agency to use.
1. Communicate the notice of price increase to your team first
Mary Lister, Content Strategist at internet services provider Starry, says it’s critical for agency owners to first tell their own employees about cost adjustments. The future is uncertain, but increasing prices will always be a part of it. Before sending a price increase letter to customers it’s appropriate to inform your internal teams.
“Increasing your cost will impact every team in the business, whether directly or indirectly,” she says.
“While your customer service team needs to know how to answer questions, your marketing and sales teams will need to understand how to explain the new pricing to existing clients and sell it to new customers.”
In communicating to your team it’s important to ensure that there is alignment between sales, marketing, and customer service. This way the sales team won’t be overpromising and the customer service team will have fewer fires to extinguish. Consistent information from all areas of the company will reduce customer confusion and push-back.
2. Quickly get to the point
James Rose, Co-Founder and Head of Marketing at Australia-based Content Snare, says it’s unfair to force clients to wade through a huge chunk of text in an email to get to a notice of price increase.
When it comes to how to announce a price increase to clients, it’s better to be upfront about it in the first few sentences rather than bury a price increase note at the bottom of a message.
“If you waste too much time on fluff and preamble, your client will see right through it. As they read it they’ll be thinking ‘come on, what’s the bad news?’,” Rose says.
Instead, it’s best to just get to the point quickly – tell them how much their prices will be going up by, what they will be afterward, and when this all takes effect. If they want to read the whole email to find out more, they will do that.
3. Consider calling VIP clients before sending a price increase announcement to customers by email
In a world where client communications and marketing processes are becoming increasingly automated, there’s something to be said about mustering the courage to call customers about a price hike.
Nykea Behiel, Director of Brand & Experience at Vendasta, says while this may not be realistic for every agency, they should consider calling at least their biggest clients ahead of a formal announcement to customers broadly.
“Your best customers will more than likely appreciate you taking the time to personally call them about a price increase note more than they would if the same information was provided via a generic email,” Behiel says.
It also gives you the opportunity to directly explain to them why you’re announcing a price increase, the results you’ve generated for that client, the value behind the increase, and address any concerns they may have. This would be a good time to offer a longer contract to these customers as a way for them to avoid increased prices for the time being.
4. Reach out multiple times and in different ways when announcing a price increase
It’s worth using multiple methods of communication when announcing a price increase so that customers don’t miss the memo. Other alternatives to email and phone could include direct postal mail, Lister says.
“I recommend using the same branded template that you use for any other company announcement, like a product update, fundraising announcement, event invitation, or discounted offer,” she says.
Behiel suggests agencies could also publish a blog or create a frequently asked questions (FAQ) page that could answer hypothetical queries and provide useful context about the price increase. This can be linked to from marketing newsletters and invoices from your agency invoicing system.
5. Provide plenty of notice
The last thing you want to do to your existing customers is blindside them with an immediate notice of price increase. In addition to providing multiple notices, it’s best practice to provide ample lead time for a price hike to take effect.
“The best practice here should be to send the price increase letter to customers about two months ahead of the actual price increase, particularly if it is a subscription or monthly retainer,” Lister says. “This allows your customers to cancel without violating any of your policies, or adjust their budgets accordingly.”
When you’re figuring out how to announce a price increase to clients and providing customers with plenty of notice, also make sure that they have the opportunity to ask questions if they have any concerns. Customers who are welcomed to ask questions are less likely to ghost your business and churn.
6. Remind them what they get from you
No matter how much lead time and transparency an agency provides through a price increase letter to customers, there may be clients who choose to seek a cheaper service.
To prevent price-related churn, Rose says it’s important to remind customers of the quality of service and results your agency is providing. Remember: Agencies can charge premium prices for their services if they’re high quality.
“If you’re doing your job well, replacing you with a cheaper competitor could backfire for them. It could take months or years before a competing agency knows your customer’s business well enough to provide the quality of service that you do,” Rose says.
Behiel agrees and adds nuances in how to announce a price increase to clients can make all the difference in helping clients recognize the value of a digital agency’s services.
“Communicate price as an investment rather than a cost. Never underestimate the power of language and vocabulary in shaping someone’s perceptions,” she says.
“Show them the value you have generated for them, such as increased website traffic, a higher Google ranking, a killer brand, and more leads.”
Agencies should also point out new services or additional value local businesses are receiving in exchange for making a higher investment.
For example, if an agency hired an experienced copywriter and photographer to boost the quality of its content services, that should be included in the price increase letter to customers.
7. Don’t be apologetic in announcing a price increase, but do express your gratitude
Expressing your appreciation for a client’s business can also be an effective way to take the sting out of a notice of price increase, especially in tough financial times.
“Tell your customers you would never have come this far without them and that you look forward to helping them achieve even more success,” Behiel says.
It’s only natural for business owners to feel guilty or concerned about losing clients due to announcing a price increase, but they shouldn’t have to feel like that. Prices go up, economies change, and everyone knows that inflation affects that change.
“Don’t be apologetic about it and don’t make it a bigger deal than it is. Costs increase over time and agencies deserve to be compensated for the value they’re bringing to local businesses,” she says.
How to announce a price increase to customers online
Not all customers communicate in the same way, and it’s likely that some price increase notes will be missed if you treat all customers as if they are the same. The initial step is to send a formal letter and email, and make the effort to call priority customers.
Apart from sending a letter through snail mail or picking up the phone, there are a number of fail-safe communication methods that should be considered. Use as many as possible to ensure no customers miss the price increase announcement and are aware of the date of change.
- Customer-facing newsletters
- Piggy back on communication that is already scheduled to go out. Weekly, monthly, or however frequently they’re sent, a notice of price increase in a newsletter is a good way to communicate with subscribers.
- Use this blog’s included template for email as well as a physical letter. They can say the exact same thing, it’s most important to have consistent information and to use multiple contact methods.
- In-app announcements
- These are timely for any customers regularly using your SaaS products.
- Social media apps
- Make a consistent reminder announcement across all social media platforms used by your company. However, this is NOT the preferred method of original communication for a sensitive topic such as announcing a price increase to customers.
- Website updates with the new pricing
- Don’t forget to keep information consistent on your website as changes are announced.
Avoid discrepancies in your messaging with all methods of communication as well as what is on your website. Send a formal notice first, and then reminders through all available channels.
Ideas to reduce price-related customer churn
Regardless of how well an agency owner executes a price increase announcement to customers, some local businesses won’t be able to absorb it.
This is especially true given predictions of and economic recession, and the effects of border closures, travel restrictions, and sporadic lockdowns or limits on gatherings over the past few years. This is all adding to the stress felt by mom-and-pop shops that are heavily reliant on tourism.
Hence, Behiel suggests agencies have an open mind on how to announce a price increase to clients. This type of announcement might be best managed on a case-by-case basis. Some practical solutions to assist struggling businesses include:
- Offer an extended payment plan or a longer transition period, if price increases are significant
- Let clients pre-pay their monthly retainer or an upcoming project at the current price
- Give customers a limited-time offer to receive the new product with fewer options at the current price
- Offer additional education or support to take advantage of any new features or services offered as part of the price increase
- Reduce services provided but keep the same rate
Just say no to some clients
Our last suggestion around how to announce a price increase to clients, is that it’s inevitable that some agencies will face situations where clients are unwilling to pay higher fees but are expecting the same level of service. This is unfair to you and your other business clients who are willing to pay more for your time.
There is also the probability of clients threatening to leave for a cheaper option and trying to negotiate a better deal. These clients are most likely toxic and not worth your time and energy. There is such a thing as firing clients who are not a good fit for your business even if they once were. Everyone will benefit from a client firing if they aren’t fitting well, you’re probably not the best fit for them either.
In such situations, it’s best to be frank on how the relationship is costing your agency money, and you need to increase the price so that it makes economic sense for you to keep working with that business.
“You don’t want to commoditize yourself and compete on price alone. When that happens, it becomes a race to the bottom,” Behiel says.
If they are still not willing to accept a notice of price increase or some form of compromise, consider letting the client go if it’s feasible to do so, or if you are confident they will be replaced with a higher quality customer.
“Every industry needs a McDonald’s, a Michelin-star restaurant, and something in between. Be what you are, choose your position on the slider, and promote it proudly,” she adds.
“Saying no makes way for yes to better opportunities. Culling clients that don’t fit your ideal customer profile can be painful, but it can also be very rewarding.”
Short sample letter to inform customers of price increase
How to announce a price increase to clients? Sometimes, sharing a short sample letter to inform customers of a price increase is the easiest way to answer the question. Below is a sample notice of a price increase letter to customers that can be used as a template for your agency. This template will reduce the amount of time and toil it takes to write a difficult letter to your clients. Update and personalize it as needed for your requirements.
Subject: Price Changes – [insert month and year]
Preview text: We’re investing to help you grow
Dear [insert first name],
I am writing to let you know our marketing service fees will be increasing [insert X percent], effective [insert month]. The new price will be reflected in your invoice from that month.
Why are our fees rising? Like any business, we are facing higher operating costs in the current economic environment. At the same time, our agency is also expanding its resources to better serve customers.
I understand no-one likes reading about a price increase, however, I am confident that your increased investment with us will yield even better results for your business.
I would like to call out some of the key results we have delivered for our clients in the past 12 months:
We love to see our clients grow and encourage you to visit [insert hyperlink] to learn more about what we are doing to support your growth in the months and years to come.
Thanks again for your business and please contact me if you have any questions or concerns.
[Name of agency owner/manager]
The best way to announce a price increase
Figuring out how to announce a price increase to clients isn’t an easy task. However, it is necessary to support an agency’s growth ambitions and offset rising costs resulting from inflation and other factors, and to keep a healthy bottom line.
- Before announcing a price increase, tell your team first
- Create additional communications collateral such as a blog or an FAQ page, on top of an email, to explain the change
- Considering calling your most important customers to inform them about the price increase before making a formal announcement
- Communicate price as an investment, and remind clients of what they have been receiving for that investment with examples of some of your biggest accomplishments
- Show empathy and try to accommodate local businesses that are genuinely struggling to pay more. You never know they could become your biggest customers one day because you stood by them
- Consider letting go of clients who aren’t willing to make a compromise on price or the amount of service they are receiving
A value-driven change that is communicated appropriately and effectively is the best way to announce any type of change customers may face while working with your business. Every business owner asks themselves “what’s in it for me,” on a daily basis. Answer that question with the value customers can expect to get in lieu of any business changes.
This is how to announce a price increase to clients effectively and with minimal push-back.
Note: Our original post by Vishal Teckchandani was updated in 2022 by Emily Dyrland