Look,Before,You,Leap,amp,#58,P business, insurance Look Before You Leap: A Price Increase Backfires
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I just got off the phone with a company that provides me aservice for which I pay $600 each month.A couple of days ago I received a letter from them sayingthat due to economic factors, cost increases, blah, blah,blah they were going to raise my rate by a "modest amount".Ok, so what do they consider a modest amount? I called themand found out that to them a modest amount was 8-10%; theyweren't sure yet.I don't know if their definition of a "modest amount" struckme wrong or if I was just against paying more for thisservice, but I took the time to look in the phone book andfind two of their direct competitors.I called each competitor and got price quotes on the exactsame service.As you probably can guess, I found some lower prices(without even mentioning what I was currently paying). Andit turned out that both of the competitors were priced aboutthe same.I then called my current provider and mentioned that theircompetitors would give me a price of $500 for the sameservice; $100 less! They said that they would research itand call me back.I got a call a few hours later saying they wanted to keep mybusiness and would be happy to match their competitor'sprice. I gave myself a pat on the back.But I started thinking about how my current providerintended to raise my monthly rate by about $50 but ended upcutting their rate by $100. So rather than creating anadditional $600 of cash for themselves next year, they arenow going to take $1,200 less.I can't believe that would have been considered a good riskby anyone. So where did they mess up?By not doing their homework.They did not take the time to compare my current rates withthe rates offered by their competitors. If they had (and Iam assuming they didn't because I can't believe they wouldtake this risk), they would not have sent me the letterabout increasing my rate.The letter led me to call them to find out the actual amountof the increase. The significant (to me) price increase ledme to call their competitors.Before the letter I was content to pay their fee. I hadn'tplanned on checking prices and making comparisons. But whenthey brought the subject of fees up, I took the initiativeand ended up with a much better deal.Maybe they were counting on most of their customers to rollover and accept it. But I wonder how many will nowrenegotiate their fees since the subject has come up.They obviously have different customers on different feeschedules. So why wouldn't they take the time to determinewhich customers should have their fees increased and whichshould be left "overlooked" this year.Customers who were paying close attention to theircompetitors fees would probably accept their "modest" priceincrease because of the hassle (read: barrier) of switchingto a competitor. Even if they did a price comparison asmall increase is usually not worth the trouble.I guess the moral of the story is that before you bring upthe subject of increased fees, make sure you know yourcustomers' alternatives. Article Tags: Price Increase, Modest Amount
Look,Before,You,Leap,amp,#58,P