How to negotiate price increases with existing clients
Give your client future-problems
The number one question I get asked by recruiters is, how can I increase my existing rate with current clients?
And it’s a big deal. A good consultant could be making £100k+ from clients who come back to them again and again, and they don’t want to put that revenue at risk.
At the same time, good consultants look at their average fee % and question whether they want to keep working on ‘legacy’ rates with their big clients. Especially if those rates were agreed a few years ago, when there were more candidates around and recruitment felt that little bit easier.
Getting your current clients to agree to a higher fee can make a big difference to your annual revenue. So here are my three tips on reducing the risk and increasing the impact of getting your existing clients to pay you more.
Tip 1: Make it a future-problem
First of all, it’s important to let your client know in advance that a price increase is coming.
We talk about pain points in sales. And being told the price is going up is a pain point. In fact there’s physiological research that shows that people experience actual pain when they see a price increase.
So let’s reduce that pain by taking it out of the here-and-now. When you say, ‘In six months’ time the price is going to go up’, the client starts to feel pain. But then the brain kicks in to remind the body that it’s not actually happening now, so they can worry about it later.
It's not my problem right now, the client thinks. And when the price rise does happen, the pain was already factored in.
Tip 2: Sweeten the deal
Introduce your price increase by telling your client the rate that you charge your new clients. Chances are, there’s a big gap between the rate they’ve agreed with you and your 2022 price.
Then sweeten the deal by explaining that you’ll give them a better price than your new clients get. Of course it will be an increase from what they’re currently on, but in context they’ll see it as a smaller increase than it could be.
You can even combine the two tips by telling them about a second price increase in the future. Again, nothing to worry about now, and they’ll still be getting a good deal… but you’re starting to shift them away from the legacy rate they’ve been paying for years.
Tip 3: Worst first
It’s all very well knowing how to increase your prices, but you’re still going to feel nervous about putting relationships at risk. So start where the risk is lowest.
Before you approach anyone, make a list of all your existing clients and rank them in order of value to you. Their ranking could be based on revenue, number of roles, quality of relationship, added status of having them as a client… whatever is important to you. Then you can identify which clients you are less worried about losing.
This way you can practise justifying your price increases, learn how clients react, get a feel for what works best for you, so that when you eventually approach your biggest clients you are confident that your approach works.
Like I said, the question of raising your fees for existing clients is a difficult one. And the impact is big.
If you want help in planning how you’re going to raise prices for your current clients, simply email me and I can explain the steps we will take.
Jon
P.S. This issue has become more pronounced as recruiters have raised their prices for new clients over the last year or two. The gap between legacy clients and the 2022 intake is more noticeable than ever.
If you don’t deal with it, this gap can start to sour your relationship with those clients who have been with you for years. You can begin to resent working on lower rates, or de-prioritise their roles in favour of new clients who are paying you more.
This is unfair to your long-standing clients, and it’s unfair to you. Address the issue properly and you protect those long-term relationships while enjoying higher fees.
If you want help in planning how you’re going to raise prices for your current clients, simply email me and I can explain the steps we will take.