5 Reasons Why You Should Pursue Strategic Rate Increases
February 15, 2017
Smart answering service managers make strategic rate increases each month, adjusting the rates of their least profitable clients. This is preferable to making annual across-the-board increases, which affect clients unevenly. And it’s certainly superior to not doing any rate increases, which could move an answering service toward insolvency.
Here are five reasons why an answering service should pursue strategic rate increases each month:
1) Turn Unprofitable Clients into Profitable Ones: No matter how carefully your rate plans are developed, they never fully align with the actual work required to service an account. Therefore, some accounts on the same rate plan may be unprofitable, while others will be profitable. It’s not uncommon for up to half of an answering service’s accounts to be unprofitable, which the other half subsidizes. Identify the least profitable accounts and raise their rates to make them profitable. Now you have fewer unprofitable accounts and more profitable ones. Repeat this each month until every account is profitable.
2) Protect Profitable Clients: Some answering services do across-the-board rate increases. Though this seems fair, it actually penalizes already profitable clients by raising their rates even more. It would be tragic to lose one of those clients over a rate increase that wasn’t justified. However, by only increasing the rates on unprofitable accounts, the profitable ones are left untouched. They will have no reason to cancel service.
3) Grow Revenue Incrementally: Increasing rates for some accounts each month means that every month the revenue from your existing client base will grow. Now increase rates on another group of accounts the second month, and a third group the third. But these aren’t increases that last for one month. Instead they are month-over-month improvements. A rate increase that produces an extra thousand dollars this month will produce an extra thousand dollars next month and every month after that, for as long as those accounts remain on service.
4) Condition Clients to Expect Rate Increases: Too many answering services are afraid to raise rates, so year after year they keep existing accounts on old, low rates that no longer make sense and render too many accounts unprofitable. Periodically increasing rates prepares clients to expect rate adjustments when needed, which produces less fallout when rate changes do occur.
5) Maintain a Healthy Business: For a business to remain healthy, it must charge customers more than what it costs to provide service, yet too many answering services fail in this area. While their overall income exceeds expenses, on an individual account basis they persist in servicing some clients even though they lose money on them month after month.
A healthy answering service will make money on every account, every month. And it takes an ongoing plan of strategic rate increases to make that happen. Don’t be afraid of raising rates. Embrace strategic rate increases as an essential element of being in business—and staying in business.
Janet Livingston is the president of Call Center Sales Pro, a premier sales and marketing service provider for the call center and telephone answering service industry, which helps clients grow their revenue. Contact Janet at email@example.com or 800-901-7706.
Peter Lyle DeHaan is a freelance writer from Southwest Michigan.
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