You may have considered announcing an increase in your consulting firm’s fees—or announcing a potential increase in fees—as a method for inducing prospects to engage your consulting firm now, while your fees are at their current rates. Let’s discuss whether that technique works or not.
Your consulting firm is better at what it does than it used to be. You create more value for clients now than you did in the past and, therefore, your fees can justifiably be higher going forward than they were in the past.
Plus, inflation is real these days, like billionaires in space, virtual reality chairs, and visiting space in a virtual reality chair (which costs less and is lower risk).
In the U.S., annual inflation exceeded 5% for each of the past eight months. Meaning, if your consulting firm charged $100k for a project last year, for the same project you should charge at least $115k this year. (That math might be slightly off, but I prefer noticeable changes.)
And since the labor costs in consulting are skyrocketing, you may be thinking of raising your consulting firm’s fees just to keep your margins intact.
Net, there are plenty of reasons for your consulting firm to increase your fees. The question, though, is this:
Will announcing a pending price increase to prospects encourage them to engage your consulting firm now?
In our experience, consulting clients rarely make a purchase decision based on a pending fee increase.
A consulting firm’s bump in fees is typically in the 10-20% range, and here’s what we know about how clients act in relation to fees:
Clients will choose a consulting firm with up to a 30% fee premium in a competitive situation (or one controlled by the federal government or a procurement department).
In a non-competitive situation or one not controlled by procurement, clients will choose a consulting firm with up to a 300% premium based on relationships, trust and demonstrated value.
Either way, a small fee difference of 10-20% doesn’t influence their thinking.
Also, if a prospective client is on the fence about whether or not to work with your consulting firm, and they’re weighing the fee relative to value, a pending fee increase won’t help your cause.
Finally, the rare client who is spurred to action because of a 10-20% fee difference is typically a bargain hunter. That’s not the type of client your consulting firm is looking for.
It still makes sense to let clients and prospects know in advance that your consulting firm’s fees are increasing.
If a client has already decided to work with your consulting firm, advising them of an impending fee increase may prompt them to sign the deal sooner.
Just don’t use your pending fee increase as a marketing message in hopes that it will drive a surge in client engagements.
Do you agree, or have you seen that announcing a price increase helps your consulting firm win projects? I’m curious to hear your experience.
Text and images are © 2022 David A. Fields, all rights reserved.