How to Raise Prices Successfully

Description

Price increases are essential to the growth of your business: How to communicate price increases to your members

Topic

Pricing

Type

GuidesArticleTemplate

Created by

Michael Gillespie

Price increases are crucial to the overall expansion of your membership over time.

When executed correctly, price increases will be welcomed by your members and can provide you with a runway to continue operating and serving your members for years to come.

This guide will cover how to effectively communicate a price increase to your members.

The Big Picture: You will need to raise your prices at some point. But in most cases, how you raise your prices is more important than by how much.

The Statistics:

Memberships that raise prices alongside the introduction of new benefits see increases in churn of only 2-3%
Memberships that raise prices without the introduction of new benefits experience an average churn increase of 10%

🚀 The Action Plan:

Use this approach when raising prices to minimize your churn risk and delight your current members.

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Why Raise Prices?

You’re a membership operator and you have an obligation to your members: To continue operating and delivering on your benefits.

You can be guaranteed that your cost of doing business will generally rise over time. This cost can rise from a number of factors. Maybe your ad costs go up. Maybe one of the many services/tools you use to run your membership increase in price. Or maybe you’re investing in creating something new for your members that will increase the value of your membership.

Regardless, we all have costs that must be managed.

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As an operator, there are two things you must stay laser-focused on: Staying in business and remaining profitable.

An Obligation to Your Audience

Whether your membership is years old or recently launched, we’re all doing the same thing here: Serving our members. Your audience expects you to be around for the foreseeable future - especially if they’re trusting you enough to pay you on a recurring basis.

Believe it or not, most membership consumers view their membership as a form of investment in themselves. Maybe it’s an investment into their wellbeing, their learning or their entertainment.

Let that sink in for a moment.

You likely haven’t thought much about the further-reaching impacts your membership has on the personal lives of the members inside of it. That’s because you’re focused on creating great content and operating your business.

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The consideration and realization of the fact that your business makes a seemingly intangible, yet impactful mark on the lives of your members crystalizes the importance of staying in business. And price increases are one of many tools that allow you to do just that.

Remaining Profitable

This one seems obvious, but you you’d be surprised at just how many membership operators dive into their endeavors head-first without knowing their numbers. Without knowing your numbers, you’re flying blind.

And if your membership is losing money it simply cannot continue to operate.

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Membership Rule Book: Always know your numbers.

Remaining profitable will not only allow you to continue to serve your members, but will enable you to invest, grow and expand your product to reach even more members over time.

The Key Components of a Price Increase

Having worked closely with many membership operators on successfully coordinating and executing their price increases, there are three key components of the increase that are instrumental in its overall success.

Three Components of a Price Increase: 1. The Reason: Why are you raising prices? 2. The Value: What additional value is being added as a result of the increase? 3. The Promise: What are you committing to doing for your members after the increase?

The above three components are what you (the operator) will need to communicate to your members during the time leading up to the increase. Below are the details of how you do this.

1. The Reason

Members must know the reason(s) why their subscription price is increasing.

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This is your opportunity to tell a great story about the success of your membership so far and how far you’ve come. Most importantly, this is your chance to share your vision for the future of your membership.

Be specific about how the increase in price will allow you to invest in the areas that matter most to members so you can continue to serve them in an even greater capacity.

If you’re raising prices in order to stay operationally efficient, then tell them.

If you’re raising prices in order to invest in new benefits, then tell them.

The bottom line: Be transparent about why prices are increasing while giving members something to be excited about in the future.

2. The Value

There’s no denying that price increases are better-received when they’re paired with some sort of increase in benefits. I always advise clients to introduce a minimum of one new benefit alongside the increase.

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Introducing a new benefit when you increase prices will: 1. Demonstrate that you’re sensitive to the fact that a member will soon be paying more 2. Reinforce the value you’re delivering and your intent to grow that value alongside the increase in price

This “added benefit” doesn’t need to be extravagant. It just needs to be something that’s extremely useful to your audience. When new benefits carry great utility, they tend to overshadow the underlying price increase.

The bottom line: Pair at least one new benefit with your price increase to maintain a member’s perceived value of your membership

3. The Promise

Finally, you’ll need to make a personal promise to your members. (A personal promise typically comes from the founder of a membership.)

What do you promise to deliver on?

What do you promise to help them achieve?

What need can you promise that your membership will fill?

Regardless, the promise you make will immediately establish a forward-looking mentality among your members and works to encourage them to remain members as they continue their journey with you.

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The promise you make to your members about the future state of your membership is the most important component of the price increase. Make sure it’s a promise you can keep. The purpose of the promise is that it demonstrates you’re hard at work for your members, even when they’re not looking.

The bottom line: Promise your members something they can look forward to and deliver that promise in a highly personal email/format.

Communication Timeline

Successful price increases implement a communication timeline that allows sufficient time for members to absorb the information, and adjust if necessary.

I typically recommend communicating a price increase two months before the increase goes into effect along with an (optional) additional reminder one month ahead of time.

A price increase needs no more than two email communications to be successful. A single, well-written email is sufficient if it receives good engagement (open rates above 50%).

Below is a templated timeline you can implement when it comes time carry out your own price increase.

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The Initial Email (Sent 2 months prior to the increase)

This email should include the three key components we discussed above (the reason, the value and the promise).
Should be personal and ideally from a founder
Should include a “thank you for being a member” message

The Second Email (optional) (Sent 1 month prior to the increase)

A friendly follow-up reminder about the upcoming price increase
Should be personal and from a founder

The Takeaway

Clear and effective communication is key when raising prices. Being personal, empathetic and authentic in your communications will not only make your instantly more credible, but will put you in the best position possible to limit resulting churn.

Remember, price increases are always appropriate as long as they align with additional value being created in parallel.

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