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    #3 - How To Raise Prices After Acquiring A New Business

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    Loiph

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    #3 - How To Raise Prices After Acquiring A New Business

    Uploaded by

    Loiph
    14 views7 pages

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    #3 - How to raise prices after acquiring a new business

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    14 views7 pages

    #3 - How To Raise Prices After Acquiring A New Business

    Uploaded by

    Loiph

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 7

    How to raise prices to boost the revenue of a newly-acquired business (and your ROI) 2

    Recently bought a business?

    Then you’re probably wondering how to raise


    revenue to boost your return on investment.

    One of the most obvious yet trickiest


    strategies to raise revenue is to raise prices.
    That way, you earn more from your current
    customers without spending more to find new
    ones.

    No business can afford to fix prices forever.


    Those that try don’t last. Customers, too,
    if they were being honest, understand that
    nothing stays the same price forever, either.

    However, if you raise prices without research,


    testing, and communication, you risk losing
    even your most loyal customers. Let’s face it:
    no-one likes paying more – unless, of course,
    they perceive some added value.

    The trick, then, is to find out what customers


    are willing to pay, get some early feedback,
    and then frame the price rise from their
    perspective.
    How to raise prices to boost the revenue of a newly-acquired business (and your ROI) 3

    Raising prices is a
    three-body problem
    If you want to raise revenue by raising prices while
    retaining your best customers, you must integrate
    three elements into your strategy:

    01 Research

    02 Testing

    03 Communication

    They are somewhat interdependent but form the chronological stages of deploying a new
    pricing strategy, safely.
    How to raise prices to boost the revenue of a newly-acquired business (and your ROI) 4

    STEP 01

    Defining what’s fair


    (research)
    The value of your newly-acquired business should be plain
    to you. But is this value reflected in pricing? How much do
    your competitors charge? Do all of your customers pay the
    same? When were prices raised last? What new features have
    launched since? Are there any enhancements in the pipeline?

    The idea here is that you move away from what your customers currently pay to what they’re
    willing to pay for your product. This is value-based pricing and only around 40% of SaaS
    businesses use this model. If this has never been done before in your newly-acquired business
    (or only been done once or twice in the past) you’re missing out on extra revenue.

    Many companies use a cost-plus pricing model that’s been around since the dawn of
    commerce. Others simply charge the same as their competitors (or a bit less, depending
    on their goals). The problem with both of these strategies is that they ignore your most
    sustainable source of revenue: customers.

    Fair pricing is charging what the customer is willing to pay. But which customer? Not all have
    the same need for your product, so before you start gathering data, you must first identify who
    your high-value customers are – your ideal customers, the people for which your company
    adds the most value. Your best customers perceive the most value in what you do so their
    opinion on pricing is gold.
    How to raise prices to boost the revenue of a newly-acquired business (and your ROI) 5

    An analysis of your customers might also reveal alternative pricing tactics, such as a tiered or
    package model where some customers pay less, some stay the same, while your power users
    pay more.

    STEP 02

    Refining your pricing


    model (testing)
    Once you know what your best customers are willing to pay,
    it’s time to test alternative pricing models. To understand
    the effect on your business as a whole, the test should be on
    a sample that represents your existing customer base. This
    will indicate your churn rate and also give you insight into
    whether your LCV (Lifetime Customer Value) will improve or
    deteriorate.

    Let’s assume you picked 10% of your existing customers, tested the new pricing model, and
    gathered feedback. Your next step is to evaluate that feedback and then refine your pricing
    strategy and test again. You continue to test, evaluate, and refine with other samples until
    you’re confident the changes won’t cause a mass exodus of your best customers and that
    you’ll continue to acquire them at the same or better rate. There’s no perfect pricing model –
    just the one that works.
    How to raise prices to boost the revenue of a newly-acquired business (and your ROI) 6

    STEP 03

    Give customers the news


    (communication)
    If you know your customers well, you know how to
    communicate in concepts and language that mean
    something to them. You need to get inside their minds
    and sell the change as a benefit, either through an
    immediate upgrade, better service, or to support
    improvements over time. You won’t please everyone,
    but that’s not the goal. Your goal here is to convince
    your best and most loyal customers to stay. Focus on
    those whom the changes affect most, or if they affect
    everyone equally, focus on the key customer personas
    identified in step two.

    If you’re raising prices without a commensurate change in what you sell, consider a candid
    message. While customers don’t care about the financial goals of your business, they do
    appreciate honesty as it’s a rare virtue these days. You’ll win more people over with a candid
    explanation than telling a spurious story to justify the changes.

    You might also consider compensatory schemes for certain customers. For example, fixed
    pricing until they’re ready to upgrade, a temporary discount, a staggered price rise over
    time, or any other mechanism that works for you. This will keep the toughest customers from
    fleeing or causing a scene on social media. In time, when the shock has worn off, they’ll quit
    grumbling and might even stay in return.
    How to raise prices to boost the revenue of a newly-acquired business (and your ROI) 7

    Whatever you do, communicate pricing changes early. Give customers plenty of time to think
    about the changes, ask questions, seek alternatives, and so on. They’ll respect you for it and
    might stay in return for your consideration of their needs. Also, people can be lazy about the
    future whereas immediacy springs action, so avoid pushing people too early or you might
    motivate them to leave.

    Raising prices is never easy, and pricing itself is a complex, often misunderstood concept. If
    you’ve run businesses before, this shouldn’t be your first pricing review. It certainly shouldn’t
    be your last. Once you accept pricing is as important as feature development or talent, you
    gain a new weapon in your revenue-generating arsenal, and will quickly realize that ROI on
    your recently acquired business.

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