How to raise your prices 20%
December 14th, 2007 • Posted by Seth Gardenswartz • Permalink
Getting 20% more for your services is simple. Just get some of your clients to tell a bunch of total strangers that your service gets five stars. The value of that fifth star is 20%. That's the finding of a comScore study released late last month. ComScore is basically the Neilson rating company for the internet. They track who is going to what kind of websites and why. In a study concerning "local" sites (like CitySearch, Yelp, Kudzu, Local.com, and YellowBot), online directory users were willing to pay 20% more for services (like food, health and beauty) from business with a 5 star review as opposed to those with 4 little points of light.
Think web directories are just for tech geeks or college kids? Roughly 160 million people use the internet in the US, and online directories tend to be used by professionals between 25 and 49 making over $75k per year. The study shows 24% of folks look at on online review before making an offline service purchase. A whopping 75% of those users were "influenced" by those review saying they were "unbiased," "efficient" and provided a nice "forum for discussion." And the influence is big. Not only will they pay 20% more for the same service from a place with a 5 star average rating, but almost 40% said they would not buy any services from a business with a one star rating.
Given the value of those ratings, it's no wonder that some businesses "encourage" folks to write good review for them. Bill's blog a few weeks ago entitled The Price of a Four Star Rating revealed the dark side of the online review world. Bribing bloggers to pump up your rating is clearly slimy and likely to backfire. However, good customers will often be happy to tell the world they love you. After all, the study showed that over 60% of online review writers put in the time and effort just to help their fellow consumers. Even more interesting 30% took the time BECAUSE THEY WERE ASKED to do so.
So, what are you waiting for?
December 17th, 2007 at 6:51 am
Hmmm… interesting idea. I am a solo practitioner, I don't think my current clients would appreciate it very much if I jumped up my rates by 20%, I think I would lose quite a chunk of them from shock! Telling them I have 5 star ratings on various websites wouldn't make them feel any better about it. How else would they know about these 5 star ratings unless I tell them or display something at my office?
Typically, I raise my rates by about 10% every 2 or 3 years.