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Raise Prices At Your Agency With This Step-By-Step Approach

raise-prices-at-your-agency-with-this-step-by-step-approach

Raising prices is a great way to improve profit margins at your digital agency—and pay yourself more. It’s all the more important today, as your labor costs go up, too. But if you raise prices poorly, you’ll lose clients and hurt profit margins. Fortunately, you don’t have to guess, and you don’t have to start from scratch!

Raising prices the smart way means keeping your best clients happy while maintaining or reducing your workload. This advice works best when you have happy clients that are getting results, a strong sales pipeline, and several months to implement the transition.

I call this method the “portfolio” approach to raising prices. Rather than raising prices across the board—by the same amount for every client—you adjust the increase to reflect each client’s circumstances. This helps you optimize overall revenue growth, balancing rate increases, and client retention. Here’s how it works, so you can apply it at your own agency.

The “portfolio” approach to raising prices 

The goal is to raise each client’s price as much as possible… but not too much. To accomplish that, think about your client base as an investment “portfolio”—some clients paying more, other clients paying less. You’ll identify and evaluate clients based on certain criteria—and then raise prices to the maximum amount each client might be willing to pay. These factors include your track record of getting results, client satisfaction, client “nuisance” level, and overall history.

Being intentional in your approach to raising prices helps you boost revenue (and profit margins) while ideally reducing the team’s workload and stress.

A content marketing agency I advise used this approach to target increases between 10 to 25 percent and achieved 93 percent of the increases they sought. In the end, they increased prices overall by nearly 25 percent. Another agency raised some clients’ prices by up to 50 percent. And including scope expansions, an ecommerce agency raised rates by eight times in just over a year for a high-performing client.

Ready to do that yourself? Here’s my step-by-step approach:

1. Start by updating your public pricing

Identify the price you’ll be charging new clients and make it public. Doing this will help “anchor” your increases for existing clients—it frames their personal increases as a special deal, compared to your new-client pricing model. 

This step will look different depending on how you structure your services:

  • If you use packages or milestones, it’s as easy as updating your price sheet
  • If you’re doing primarily custom work, update your Minimum Level of Engagement (MLoE) instead 

Do you have existing sales prospects who are on the fence about signing on? Tell them the new price and offer to honor the old price if they move forward within a certain time frame, or for a certain amount of time.

2. Create an annotated list of all of your clients

Make a list of all of your clients, and then add notes about each one. I recommend “coding” them by key factors to help you see where they fit into your portfolio. For instance, what is their current value (high, medium, or low)? What is their future potential (high, medium, or low)? How likely are they to recommend you to others? Are there other reasons you’d choose to raise their prices more or less than others?

As a shortcut, you can use my free Agency Client Rating Matrix template to get started—follow the existing criteria or add your own. If you’re not the client-facing contact, get input from your account managers.

Once you have the annotated list, group clients by price-increase “tier” (high, medium, low, or none).

3. Draft messaging by price-increase tier

No one loves paying more money. But happy clients getting big results will be more open to an increase than an unhappy client that isn’t satisfied with their results. Thus, you’ll want to draft two to four versions of the messaging about the price increase.

Here are some pre-written examples to help you get started.

Example 1: A happy client 

Consider this for a happy client who’s been at their current price for several years:

“Before we wrap up our call today, I wanted to share a heads up about pricing. You’ve been at your current price for three years. Our new clients are now paying 50 percent more for a retainer like yours. Because we enjoy working with you, we have a special deal in mind. Would you like to hear more? [pause for client reaction] We can lock in your current price for another three months. Then, instead of going from $20,000 a month to $30,000 a month, we can give you a client loyalty discount—making your future price $25,000 a month. And that’s locked in for 12 months. [pause for client reaction] What questions do you have?” 

Example 2: A neutral client 

Consider this for a neutral client (neither happy nor unhappy) that you’d prefer to keep:

“Before we wrap up our call today, I wanted to share a heads up about pricing. You’ve been at your current price for several years. Our new clients are now paying 30 percent more for a retainer like yours. But I have a special deal in mind. [pause for client reaction] We can lock in your current price if you sign a new 12-month retainer, or a 15 percent increase if you prefer to stay month-to-month. [pause for client reaction] Which seems like a better match for you?”

This is an example of making things “strategically free”—or here, “strategically discounted.” You call out that the client is getting a special deal… and that it won’t last forever.

Example 3: A difficult client 

Consider this for a difficult low-budget client that you’re willing to lose unless they significantly expand their budget:

“Before we wrap up our call today, I wanted to share a heads up about pricing. You’ve been at your current price for one year. Our new clients are now paying twice as much for a retainer like yours. Would you like to hear more about renewal options? [pause for client reaction] We can lock in your current price for another two months. Then, instead of going from $4,000 a month to $8,000 a month, we can give you a loyalty discount—making your future price $7,000 a month. Or, we can reduce turnaround time, and the new price would be $5,000 a month. [pause for client reaction] Which seems like a better match for where you are today?”

Here, you’re less accommodating than with clients you want to keep—and indeed, the client may choose to leave entirely. But no matter which option the client chooses, you’re happy with the outcome. I call this negotiation technique “Reason, Options, Choose.”

If a client is abusive to your team, don’t raise their price. Instead, it’s time to fire them.

4. Start sharing the message with an initial “test” group of clients

Do a small test before you tell all of your clients. This helps you see how your unique client base reacts to the news, so you have room to adjust with the rest.

Every agency approaches this differently. Some like to talk to the highest-risk clients first. Others prefer to save them for later.

Either works, but anticipate some attrition will happen in this process—more on that below. Having your best clients on board from the beginning will make it a lot easier to manage if the high-risk ones don’t pan out.

As you and your team share the renewal details, don’t talk too fast. Overloading them with information will leave them confused and upset. Clients need time to process. For example, I coached an agency owner on helping his account managers deliver the updates. Their initial versions were 30 seconds long, too fast for the information involved. I recommended a new script that took about two minutes to deliver—and the agency secured a better than 90 percent upsell rate.

5. Adjust the rollout based on initial reactions

If you start with the clients you’re most confident will accept the price increase and it doesn’t go according to plan, take a step back. 

What needs to change? Is it your messaging? Do you need to restructure your price-increase tiers? Or are your clients not as satisfied with your work as you think they are, making them hesitant to pay more?

If you’re struggling with client satisfaction, pause on the price increase. Focus your attention on improving your client experience (and then strengthening your business development pipeline to find people who’ll pay your new public prices).

If the issue is that clients are picking up that you’re uncomfortably charging more, I recommend you read Barbara Stanny’s book ‘Overcoming Underearning’. Her advice will help you feel more confident about getting paid what you’re worth.

Best practices for increasing prices

Keep these best practices in mind as you go through the “portfolio” approach to raise prices:

Timing

No agency can afford to keep prices the same for more than a couple of years—the prices for everything else (and staff salaries) are going up even if yours aren’t. For this reason, I recommend agencies increase their prices every one to two years.

Give existing clients at least three months’ notice of the increase. Longer is better.

Raise prices for new clients immediately, so you can anchor the current clients’ increase as being smaller than that.

Don’t tell all your clients at once. You want to refine the messaging rather than blast it out to everyone.

Most importantly, remember that this method takes time—don’t expect to do it all in one week. You’ll need to enlist your team to gather data on client satisfaction, build out your unique approach, and align on messaging.

Strategy

Gather your team’s insights on each client’s current satisfaction level to inform your price-increase tiers. Adjust the aggressiveness of each tier’s increase to match the strength of your business development pipeline. If your goal is to retain most clients, do smaller increases. If you want to do some strategic churn, charge more (especially for nuisance-y clients you want to eliminate).

Unhappy clients will fire the agency rather than pay more. You could keep them at the old price, but think hard about whether you really want to keep them. In my experience, unhappy clients become “neutral” clients at best… and those don’t drive your agency forward.

You may have some great clients that you don’t want to charge more—that’s fine. You don’t have to increase everyone’s prices, but you do want to make sure everyone understands they’re getting a special deal. Include messaging for them in your communications plan.

Messaging

The client’s usual account manager should deliver the news, as the “owner” of the relationship. Practice makes perfect—do role-playing or practice scenarios before they start calling real clients, so they don’t fumble things when it counts.

Under no circumstances should the account manager’s boss deliver the news—this erodes their authority with the client. If your account managers are less seasoned, have their boss provide them extra coaching.

Share the news in a call (phone or video), not as an email. The account manager needs to judge the client’s reaction, and that’s not possible through an email. Lean into the awkwardness. 

If at all possible, share the update verbally at the end of an existing call (with enough buffer for the conversation), rather than emailing it out of the blue. Warmth is key.

Consider if there are any value-adds you can include, with minimal fulfillment costs. These are special items that won’t add more hours to your work schedule. For instance, is there an existing product you can offer for free, or revamps you’ll implement to improve your services? Is there a special pre-pay bonus you can offer, which sees the client lock in their new pricing by pre-paying for a certain amount of time?

Prepare to over-communicate, reiterating the increase during conversations in future months.

Be ready for some clients to escalate to someone else (the salesperson, you as the agency owner, etc.). Be sure that person backs up the account manager on the increase, or you risk hurting the account manager’s authority in the client relationship.

What about client attrition?

Yes, it’s possible that you might lose some clients as you raise prices. This will depend on your client base, their current satisfaction, and the messaging.

Think of clients as existing on a continuum of satisfaction within the portfolio. Clients who love your work will probably be fine—and may even be happy to pay more (or at least be neutral about it). Clients who aren’t happy with the agency are probably going to be shaky.

But… that’s not necessarily a bad thing. As a director of client services at an agency, I raised prices by 31 percent. We kept 100 percent of clients—aside from a nuisance client shifting from retainer to project-based… which wasn’t exactly a loss.

Ideally, you renew 80 to 90 percent of your retainer clients each year. That assumes a moderate combination of increases with support from your sales pipeline, and your capacity to handle new work as you churn out lower-budget clients.

Applying this advice at your agency

As salaries and other costs go up, it’s time to raise prices at your agency. This will help you grow (or maintain) your profit margins.

Fortunately, higher prices won’t automatically lead to losing all of your current clients. The key is to fine-tune the increase for each client. Instead of an across-the-board rate increase, some clients will see large increases, while others will see smaller ones.

By following an intentional “portfolio” approach to raise prices, you can minimize unwanted attrition while maximizing your overall increases. This will help you increase overall revenue and profit margins, giving you a financial cushion to prepare for your business and personal future. You’ll be getting paid what you’re worth!

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This article originally appeared on the Shopify Web Design and Development blog and is made available here to educate and cast a wider net of discovery.
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