In this podcast, the host and their guest discuss strategic methods for raising prices for existing customers without alienating them. They emphasize the significant impact of pricing on profits, illustrating that even a small increase can substantially boost earnings. The guest outlines a compassionate approach to communicating price hikes through a well-crafted letter that highlights company growth, current value provided, and future improvements. They suggest framing price changes in a way that maintains integrity and customer relationships, while also offering individual solutions for those significantly affected. Additionally, the guest advises against engaging in public debates about the increase, opting for direct conversations instead, and stresses the importance of following through once a decision is made.
Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe.
The introduction sets the stage for the podcast, indicating that the content will cover various aspects of customer value maximization and includes practical advice based on past experiences.
And the number one lever on making money is what you're pricing at, right? We've done this in thousands of businesses now, and there's a process that we go about this...
Speaker B highlights that pricing is the most critical factor in determining a business's profitability, suggesting that a well-thought-out pricing strategy can lead to significant financial gains.
But here's why this is so important. So let's say that your business runs at a 20% net margin... If you doubled your price, you would six x how much money you make.
The quote explains the rationale behind price increases and the significant potential for profit growth, even if it means losing some customers.
So what I want to do is show you the right way, because the wrong way to do it is send an email out saying, hey, we're raising our prices, screw you.
Speaker B emphasizes the need for a tactful approach when informing customers of price increases to avoid alienating them and causing mass customer departures.
And so the way that we do this is through a price increase letter. And if you're curious, my gym launch Secrets book is a book that is about gyms, but it is a business book that is simply applied to gyms.
This quote introduces the price increase letter as a method for implementing price changes and suggests that the strategies discussed are not limited to one industry but can be adapted for broader business use.
So the first thing that we want to do is we want to say, hey, you've probably known that we've been growing a lot. You've probably noticed a lot of the good things that are going on right now. And so that's why I'm writing this letter.
This quote explains the initial approach to writing a price increase letter, starting with a positive tone by acknowledging company growth and improvements, which sets the context for the forthcoming price increase.
And so you want to list out the stuff that you're doing and say, okay, we hire and retain the best talent. We offer continued education for our employees. We're providing new softwares and equipment to our members that we always try and keep up to date. That's what we're currently doing.
This quote details the importance of reminding customers about the value they receive, including the company's investment in talent, employee education, and up-to-date resources, reinforcing the justification for the price increase.
We want to really level up the brand, and we want to do it for you, right? So you want to tell them what's coming. So this is like, we want to add these x, y, and z things. We want to add specialty programs. We want to add higher levels of service. We want to add events to our business.
Here, the speaker emphasizes the need to communicate future plans for expanding and improving the business, which helps customers understand the reasons behind the price increase and the benefits it will bring.
And then what I like to do is I like to tie this increase to a promise of values. Okay? Now, what I mean by that is real quick, guys, if you can think.
This unfinished quote suggests that the speaker prefers to connect the price increase directly to a promise of delivering greater value, implying that the increase is not for profit alone but for reinvestment into the customer experience.
"About how you found this podcast, somebody." "Probably tweeted it, told you about it." "Shared it on Instagram or something like that." "The only way this grows is through word of mouth."
These quotes highlight the organic growth strategy of the podcast, emphasizing the reliance on listeners to spread the word.
"And so I don't run ads. I don't do sponsorships. I don't sell anything. My only ask is that you continue." "To pay it forward to whoever showed." "You or however you found out about this podcast, that you do the exact same thing." "So if it was a review, if it was a post, if you do that, it'll mean the world to me." "And you'll throw some good karma out."
These quotes reflect the host's commitment to maintaining a non-commercial, community-driven approach and the belief in the reciprocal benefits of sharing valuable content.
"I want to tie this to values that I ascribe to, that no one can contest." "I have made this promise to you and with integrity, I can no longer provide the level of service that I have promised unless we do these things." "And the only way for me to do these things is for us to have a corresponding increase in price."
These quotes convey the host's dedication to value and integrity, explaining that price increases are necessary to uphold the quality of service promised to the audience.
"Now, mind you, when you're communicating the price, it's also important to communicate the price in a way that's attractive." "So you don't want to say, hey, it's going to cost you $5,000 extra a year. It'd be better to say, it's going to cost you an extra $100 a week, right." "It's only a dollar a day."
These quotes discuss the psychological impact of how prices are presented, suggesting that smaller increments make the cost seem less daunting to the customer.
"I am fervent that this is something I'm planning. My flag here is that I demand to be the best in the marketplace." "And for us to do this, we must continually invest." "And for us to do that, this is what is required."
The speaker stresses the relationship between investment, quality, and integrity, highlighting the rationale behind needing to adjust prices to maintain high standards.
"And what I do here is I say, if this is going to materially affect your life, if you're not going to be able to pay your mortgage, you're not going to be able to buy groceries for your kids, please reach out to me and we can figure something out." "And so by saying that, you automatically perspective to everyone that, listen, no one's going to go homeless over this thing."
These quotes show the speaker's understanding and willingness to support customers who may face financial difficulties due to the price changes, emphasizing empathy in business.
"Now, if you make an announcement like this, which I recommend you doing via video and via direct mail, you want to make it."
This quote emphasizes the recommended mediums for communicating price increases—video and direct mail—to ensure the message is clear and personal.
"And then also turn the comments off on whatever the post is, because believe me, you don't want to deal with that if you just say, hey, I don't want this to be a gossip forum."
Turning off comments is advised to prevent public backlash and to encourage individuals to approach the business owner directly with concerns.
"Out of respect for you, I want to deal with these face to face and not over the keyboard."
Face-to-face communication is preferred for handling concerns as it shows respect for the customer and avoids misunderstandings that can occur with written communication.
"Because I'm telling you, if you raise your price, like I just told you, if you have a 25% margin and you raise your price by 25%, you double your profit."
This quote explains the direct impact of price increases on profit margins, illustrating how a 25% price increase can lead to doubling profits.
"So I told you I lost a third of my customers. That's because I tripled my price."
The speaker shares personal experience, indicating that significant price increases can lead to customer loss but can also be part of a successful strategy.
"And the people who do leave are usually your worst customers, and you've been wanting to get rid of them anyways, and this gives you a great time to do it."
This quote suggests that price increases can serve as a way to filter out less desirable customers, improving the overall customer base.
"I write a letter, I tell them why I'm setting the stage for why we're doing this. I tell them all the things that we're currently doing that they don't know that we're doing."
The quote outlines the structure of the announcement, starting with an explanation of the reasons behind the price increase and highlighting the unseen value provided.
"Then you tell them about the future of what's going to happen, what the benefits are going to be to them, to what they're about to enjoy, and how that's going to impact them in a real way."
The future benefits of the price increase are emphasized, ensuring customers understand how they will gain from the changes.
"And then finally, I like to end with values and perspective. All right, so probably values are right here. So values is kind of the wrap up. So just consider that 3.5."
Ending the announcement with a discussion on values and perspective is recommended to reinforce the company's commitment to its customers and to mitigate concerns about the impact of the price increase.
"And then you have your wrap up, which is, hey, big picture, this isn't going to make you or break you. You're not going to go homeless because of this."
The wrap-up of the announcement is meant to reassure customers that the price increase is manageable and will not have severe negative consequences for them.