How do you all feel about raising prices?

I mean, I'm just doing some simple math here, and take the following example (using round numbers for simplicity).

Say you have 100 customers, each paying $10/mo. You are currently providing a good service, and for the most part, your customers are happy. Your current monthly revenues are $1000/mo.

Now, you decide that you want to raise your price from $10 to $12/mo. Figure in a 5% loss of customers due to the price increase. Your monthly revenues increased by $200 ($2/mo * 100 customers). But decreased by $60 ($12 * 5 customers), leaing you with an end increase in revenues of $140/mo.

What do you folks think of this?

I think cap prices for current and raise for new. You don't really need the extra 200 do you?

Originally posted by pixel_fenix
I think cap prices for current and raise for new. You don't really need the extra 200 do you?

I agree. I've never liked the idea of raising prices on existing customers.

Originally posted by Moni-Q
I agree. I've never liked the idea of raising prices on existing customers.
I think this also depends on your market, if your client base is mainly local businesses they will be more receptive to a small annual price increase. (they probably increase their prices anyway)

If your clients are worldwide internet based sales it is harder to increase prices as the clients would probably have more of an inclination to seek out a new host. (After all, they have already found the host with the services & price they budgeted for)

I would suggest increasing the prices only for new customers. At least this is what my company's policy is. It is not good to have dissatisfied customers.

Hosting Customers are very price Conscience and something as small as a $2 raise in prices might make a few of them move,which is costing you more than you'll make in the long run.

Originally posted by Moni-Q
I agree. I've never liked the idea of raising prices on existing customers.
Ditto. In the 3yrs that we've been in business, we've never raised pricing for an existing client. We have increased pricing for new clients, but that never effected existing clients.

Funny how clients expect not to have pricing raised on their existing plans, but the minute you make the plans cheaper, they expect their plan to be cheaper too. :D :eek2:

Well, I have it written in my TOS that prices for existing clients will not be raised.

And I used the small example for simplicity. What if you have 1000 clients, or 10000 clients, that equates to $2000, or $20000 more per month in revenues.

$20,000/mo * 12 = $240,000 more a year in revenues.

I know its not a standard practice in the hosting industry, however, in many others, it is. How often has your cable bill, or phone bill increased in price? I think that by providing a service to customers, if your costs change, you could end up hanging yourself if you don't reflect those changes to your existing clients.

I don't think there's anything "morally" wrong with raising prices. Just because it isn't typically done in webhosting doesn't mean there isn't justification for it.

But, depending on your customer base, I think your 2% deflection rate might be a bit low. Obviously, having small business clients vs. normal "web found" clients, will affect the %, but I'd prepare for more.

Ultimately, it comes down to whether it makes business sense for you. If it does, raise the prices.

I would try very hard not to change the price for current customers. You might possibly want to point them in the direction of the new plans, and give them incentive (added value) to switching, but I would avoid just a straight change of the price for current customers unless there was absolutely no way around it.

If it comes down to absolutely needing to change the price, I'd give them very long notice. At least 3 months. That way it gives them time to clearly thinks things through, and gives them options. It's like selling cars, car salesman try to entice you to make a decision on the spot, because you tend to let the emotions get to you and you don't make the rational decisions you normally would. This is the same thing, only backwards. If you give people little time to reflect on these changes, they may be forced to make a quick decision on whether to look for a new host. As such, they may hastily make an irrational decision they otherwise may not. I think if you give them time to decide, as more time goes on the more they'll realize that the extra $2/month is well spent.

I don't think raising prices is the answer, it will just make your customers unhappy and they may consider moving, maybe even more than 5%. I think the only way you could raise prices was if you had a really outstanding service or you added a new feature into your hosting.

Once again, it comes down to what value your customers are getting.

If they are happy with you, and they believe they are getting good value, then they will be much more likely to stay with you after the price increase.

If you are giving them "standard" value only, then they might realize they can get that same value for the "old" price somewhere else.

In other words, if your clients are with you because you are you, then they'll stay no matter the price. But if they're with you simply because you happened to be at the right place at the right time and they haven't bothered to look elsewhere... then good luck!

I hope that made sense. :)

Yes, but the hosting industry is one of the few industries where our prices go down every year.

Look at computer hardware. It's now ridiculously cheap. You can build a 1U/2U P4 server that can host 600 domain names for about $1000. That price only goes down as the price/performance curve gets better and better.

Bandwidth, amazingly, is still dropping in price. We just re-negotiated our contract with AboveNet and agreed to double our bandwidth commit with them. But the bandwidth is half the price, so we end up paying the same amount (we threw in an extra couple racks and such so the contract was a higher MRC for them.) A 100Mbit commit at a Tier-1 carrier (AboveNet, Level3, GLBX, etc.) was $50+/Mbit a year or two ago. Now I've seen it as low as $25/Mbit. Cogent is selling at $10/Mbit to hosting companies who wish to use as little as 200Mbit. It's a war out there in the transit provider world, and hosting companies are reaping the benefits.

I don't think it's reasonable to raise your prices when the cost of everything except human labor should be going down every year. For us, human labor is not as high of a cost as bandwidth/rackspace/etc. Comcast et al. raise prices because they have an unfair monopoly; you are not in the same position. Your operating costs should be going down every year at this point, and there are so many hosting companies out there with ridiculous offers that I wouldn't risk alienating any of your customers over something as small as $140/month.

http://www.webhostingtalk.com/showthread.php?s=&threadid=349666

I branched this thread into a related topic. I'm curious to see what you all think.

IMHO, raising prices can easily be done for a company that offers a "value-based" service. (Compete on service and not plan specs.)

But raising prices is almost impossible for a "commodity-based" company. (Compete on offering more then the next guy at lower cost.)

Really amish it is up to you. It is your business and you decide what you think is best for your clients and what is best for you. Though I would personally just raise the prices on new clients and keep the old clients at the same price.

Originally posted by amish_geek
How do you all feel about raising prices?

I mean, I'm just doing some simple math here, and take the following example (using round numbers for simplicity).

Say you have 100 customers, each paying $10/mo. You are currently providing a good service, and for the most part, your customers are happy. Your current monthly revenues are $1000/mo.

Now, you decide that you want to raise your price from $10 to $12/mo. Figure in a 5% loss of customers due to the price increase. Your monthly revenues increased by $200 ($2/mo * 100 customers). But decreased by $60 ($12 * 5 customers), leaing you with an end increase in revenues of $140/mo.

What do you folks think of this?

Originally posted by dmike
I don't think there's anything "morally" wrong with raising prices. Just because it isn't typically done in webhosting doesn't mean there isn't justification for it.

But, depending on your customer base, I think your 2% deflection rate might be a bit low. Obviously, having small business clients vs. normal "web found" clients, will affect the %, but I'd prepare for more.

Ultimately, it comes down to whether it makes business sense for you. If it does, raise the prices.

I would try very hard not to change the price for current customers. You might possibly want to point them in the direction of the new plans, and give them incentive (added value) to switching, but I would avoid just a straight change of the price for current customers unless there was absolutely no way around it.

If it comes down to absolutely needing to change the price, I'd give them very long notice. At least 3 months. That way it gives them time to clearly thinks things through, and gives them options. It's like selling cars, car salesman try to entice you to make a decision on the spot, because you tend to let the emotions get to you and you don't make the rational decisions you normally would. This is the same thing, only backwards. If you give people little time to reflect on these changes, they may be forced to make a quick decision on whether to look for a new host. As such, they may hastily make an irrational decision they otherwise may not. I think if you give them time to decide, as more time goes on the more they'll realize that the extra $2/month is well spent. Excellent post. I agree.

I would build some new features into new (more expensive) plans for new clients. Then I would try to entice existing customers to upgrade.

As stated in dmike's post, it will also depend on whether your existing clients are local or "web found". If local, they will be far more receptive to a small price increase.

Undoubtedly, you will lose a few clients. But it comes down to the net results. If your net revenue goes up, you may consider this as a good move for your company.

Vito

Well that is the thing. Local people do not care for the most part. With the sign business over the 40 years we have raised our prices, and they did not care.

If you have a product that is of good quality, good name, and dedication to make clients happy they will stick with you.


Originally posted by vito
Excellent post. I agree.

I would build some new features into new (more expensive) plans for new clients. Then I would try to entice existing customers to upgrade.

As stated in dmike's post, it will also depend on whether your existing clients are local or "web found". If local, they will be far more receptive to a small price increase.

Undoubtedly, you will lose a few clients. But it comes down to the net results. If your net revenue goes up, you may consider this as a good move for your company.

Vito

That is true, I agree with the part about offering added value to help compensate for the added price. Whether that value is increased resources, or a new dedicated support employee, or a new toll-free phone number for support.

And then there are some cases, when some companies just need to raise prices in order to stay in business. I can think of a few that would have stayed in business had they increased their prices just a little. In todays cut-throat economy, added revenues can make or break a company.

Originally posted by amish_geek
And then there are some cases, when some companies just need to raise prices in order to stay in business. Perfect example:

A Canadian host who charges in US dollars. Over the last 12 + months, he has lost immeasurable revenue due to the failing US dollar.

You gotta make that up sooner or later...

Vito

Originally posted by vito
Perfect example:

A Canadian host who charges in US dollars. Over the last 12 + months, he has lost immeasurable revenue due to the failing US dollar.

You gotta make that up sooner or later...

Vito

Yes Vito you have to look out for your self as well make customers happy. At times you can not do both, but at other times you can. Though I do not see Vito having a problem because his cousin will take care of all the people causing trouble ;) .

Amish is most of your hosting local or internet?

Greetings:

Over the years, we've found the one of the top challenges is to set a price you can keep for along time; and potentially work down from it or keep it the same by adding more value.

Most people have what I refer to as the "candy jar" mentality.

If they ask for one pound of candy, and you start off with a half a pound scoup, and then keep adding scoups until you get to a pound, they are happy.

If you accidentally start of with a 1.5 pound scoup, and then start scouping off the excess to get to a pound, some people actually react negatively even though in the end, it is the same pound.

Add the above to the unfortunate fact the Internet industry appears to be the only one where raising prices is not easy.

With that stated, I would look at creative ways to accomplish similar goals.

This can range from the already stated "new price for new clients only" to creating a separate company (though it may only be a DBA of the first) to finding value added additions you can put into place for extra revenue.

The latter can even be accomplished with existing clients looking at POP3, database, and other usage; and if you find your clients are not yet using the limits, lower them to a reasonabl enumber "above" their current use, and then charge a reasonable amount for extras.

You can probably use a combination of techniques to accomplish your goals.

In any event, God is in the picture, and He works not only in our personal lives, but every aspect of our life. You are a man of God, Aaron; and have the prilvaledge of looking to Him for what will work best... and don't forget the local business persons who are involved in your church. They too, may be able to provide some advise (the WHT information is good; these are just suggestions for more input).

Thank you.

Usually it is best to start prices high and lower prices. When you raise prices, even if it isn't very high clients can get mad and if potential clients see your price raise they will go to a different host.