Many modern businesses are now transitioning to so-called “subscription-based” models where they charge customers a periodic fee. It seems that both customers and companies prefer this approach. Customers can slice their outgoings into smaller, regular chunks, and businesses can get more recurring revenue streams.
Inflation, changes to services, and increases in costs, however, can all mean that firms in the subscription economy need to raise their prices from time to time. When consumers are used to paying a specific amount, it can be hard for enterprises to justify price rises without creating a PR nightmare.
In this article, we’re going to look at some of the ways that you can increase your subscription billions without annoying customers or forcing them to look elsewhere.
Providing extra value whenever you raise prices
Raising prices is never a popular move. Customers want your company to provide them with the cheapest possible rates forever. Even so, it sometimes becomes a necessity.
Smart companies know that they will inevitably have to raise prices in the future (barring technological miracles). Because of this, they start planning the extra value they will offer customers months, even years, in advance. The idea here is to increase prices but also throw in extras that will actually benefit customers that they don’t receive right now. Of course, you don’t want to go overboard here and spend more than you receive in extra revenue, but it can be something that softens the blow.
Be clear about why you need to raise prices
It is a fact of business that companies have to raise prices from time to time. It is not about “profiteering” as some customers might believe. Instead, it is a response to fundamental economic realities.
Your business, for instance, might need to raise prices to:
Comply with onerous regulations from the government
Compensate for increases in inflation since the last round of price setting
Pay higher wages to provide a better service
Use extra revenue to develop better products for customers
Increase the scope of the service
If you’re facing these realities, don’t be afraid to communicate with your customer base about them. The more open you can be about why your prices are going up, the more likely your customer base is to accept the move. They might not like it, but they can at least understand it.
Reward loyal customers
Finding out that subscription prices are going up is never a pleasant experience as a customer. In spite of this, however, companies can do a lot to sweeten the deal, especially for the most loyal subscribers. If a customer, for example, has been with you for more than a year, you might want to offer them six additional months at their current price before moving them up to a higher tier.
Know what your competitors are doing
Finally, take a look at what your competitors offer and whether there is a compelling reason for you to raise your prices. If rivals are charging higher prices for a weaker set of services, then you have every right to increase your premiums. If, however, their prices are low compared to yours and they offer a comparable service, raising your fees is a bad move.