A Lab Manager's Guide to Communicating Price Raises to Customers
In commercial labs, a variety of factors go into determining how much tests and services should cost. Inevitably, these factors may cause a lab manager to increase prices from time to time. This is a decision that never comes lightly, as nobody wants to disappoint their customers.
But price increases are sometimes necessary, and in these instances, you have a rare opportunity to demonstrate your lab's professionalism and the value of your services. If you're dreading telling customers about the annual increase, we've adapted Laboratory Medicine's 2011 approach for clinical labs and distilled it down to six essential steps water lab managers can take to communicate price changes effectively and minimize the impact on business.
1. Shift Your Mindset
First off, don't feel bad about raising prices. The services you provide to customers are essential to keep communities safe, and your lab must remain profitable to continue providing them.
Keep running your lab just like you'd run any other business. For instance, envision your lab under ideal conditions — what does it take to get there? Certainly, you'll have to increase prices over time to achieve these visions, but you'll also have to do so to keep providing the best service to your customers. According to the KPMG report, "Expect the Unexpected: Building business value in a changing world," the average cost of doing business in America jumped 50 percent between 2002 and 2010.
Keeping prices the same, decade to decade, just won't keep your lab afloat, especially considering inflation. Not issuing a price increase actually equates to you giving customers discounts on your goods and services. Think of it this way, using an Inflation Calculator: If a lawn servicer kept pricing flat at $100 every year from 2008 to 2018, they would essentially be offering a 20 percent discount by not accounting for the fact that the price of the service increased by 20 percent over that period.
Additionally, by taking a step back and looking at the big picture, you can better re-frame annual increases against the actual cost of running your lab. Your customers should understand your lab can only exist if it makes a profit, so don't apologize when making essential changes.
- Recognize that price increases are not only necessary to keep your lab operating, but expected in an inflationary economy.
- Devise a communication plan that outlines the timing and delivery method for each customer.
- Emphasize the value your lab brings customers, rather than focusing on the price change.
2. Find the Right Time
Once you're in the right mindset, consider when and how to communicate pricing changes to customers. Laboratory Medicine recommends discussing price changes with customers before they occur. This way, they won't have sticker shock when they receive their next invoice, and they'll respect your business for being upfront.
Whenever your business undergoes a change that'll affect customers, you should put yourself front and center to heed any concerns. There should never be any surprises about what your customers are getting from your lab — especially when it comes to bills.
3. Customize Your Notice
No matter which method you use to communicate these changes, you should customize the message for each audience. Start by identifying which customers will be affected by the increase, and craft your messages accordingly. Distributing customized versions of your price increase notification will go a long way in both softening the blow and showing customers you value and understand them.
For example, you could craft one version for most of your list and another for your more budget-sensitive customers. Or, you could segment your list by each type of customer, with a different letter for each one: private citizens, local small businesses, municipalities, researchers with grants, etc.
Sending a letter may not be the best way to reach all your customers, though, so consider whether other routes, like email, phone calls, or invoice notices, would be more effective in getting your message across. Also, pin down the best time and frequency in which to communicate with your customers. For some key customers, it may be best to give them a call along with sending an email or paper letter.
4. Know What to Say — and When to Keep Quiet
It's tempting to justify the increase by explaining your back-end costs — but don't. If you get into the weeds about why prices rose, future price changes will be more challenging to communicate. Plus, certain reasons — like raising salaries to retain key staff members — are difficult to explain to a customer. Avoid this slippery slope and stay straightforward about the increase, focusing on the value it brings. Tell customers what they'll gain by sticking with your lab, such as increased support, better quality, or faster turnaround times.
For budget-conscious customers, explain that price changes are normal and essential in the industry. In fact, the American Water Works Association reports that public water utilities of all sizes increase user rates each year, so why should you feel bad for doing the same? Take this opportunity to reiterate your lab's highly competitive rate and how you've gone to great lengths to give customers the best possible deal.
Additionally, carefully consider your wording. Instead of saying, "Our prices have increased," consider saying, "I'd like you to know in advance about some changes to our pricing." This subtle shift in wording turns this into an opportunity to connect with your customers.
5. Execute Your Communication Plan
All the planning in the world won't matter if your message is poorly communicated, so make sure to stick to your strategy and ensure that pricing change messages go out on time. If a customer pushes back, don't waver. Remember that you've had difficult conversations with customers in the past — such as when delivering unexpected test results — so use those firm communication skills.
As lab manager, you're likely the lead communicator and the one who will distribute these materials, but ensure anyone in customer-facing roles is on the same page with how this news should be relayed. Make sure they're prepared for disgruntled customers and know how to emphasize the value coming with any increases.
6. Follow up and Move Forward
Once the word has gotten out, follow up with any customers who expressed concerns and make time for a discussion. You know which of your customers might appreciate this extra conversation — perhaps you've had issues with them in the past. Don't be worried if you hear nothing but radio silence, though. Let the information soak in. Some customers may need to read over a communication multiple times before they internalize it.
By reaching out to customers — before and after changes — it shows you value them and their feedback. For instance, maybe phone calls were too aggressive or mass emails were a little too depersonalized: Take these thoughts and calibrate moving forward. Additionally, hold a final closeout meeting with your staff to discuss how it went and brainstorm for the future. This feedback loop is easy to skip over, but it provides critical time for reflection and improvement.
When everyone is on the same page, price increases should be seen as reasonable, necessary changes. Be proactive, don't apologize, and keep communication respectful, open, and focused on value between your staff and customers.