Why price hikes really cost you business

It’s old news by now that Netflix recently hiked their prices. They made the pricing decision to split their DVD and online programs into separate pricing for their customers, effectively resulting in a 60% price hike with little to no added value or reasoning for the price hike. You got a notice and a little over a month later your prices went up if you didn’t choose between DVD rental or online streaming.

I have to admit, at first I didn’t understand why so many people were upset. I mean, I definitely understand the reasoning that they offered no value, and yet were hiking their prices with little notice. However, both core services were a great value and still cheaper than going to Blockbuster or renting a movie from Redbox every night.

I didn’t really understand until I got another notice, this one from Equifax informing me that my prices would be going up. It was only $2 a month, not exactly breaking the bank. My weekly Starbucks run costs more than that every time. The kicker for me was that both services are luxuries. I don’t NEED Equifax, it’s more of a constant reminder and feel-good service. It was just a small charge that came out of my bank account every month and I never really stopped to think after my initial purchase if I really did need this service. I had it, it did what it was supposed to, and that was that.

But when I got the notice in the mail of the price hike, I was immediately faced with the decision of re-evaluating if I really needed this service or not. And that’s the real danger with price hikes.

If you’re running any kind of subscription service, your customers are unlikely to be constantly evaluating whether or not they really need your service. That’s the beauty of subscriptions. People easily forget and tend towards continuing with whatever the norm is. If it happens automatically every month, your customers likely never even think about it. That’s why financial advisors so highly recommend having savings automatically pulled from your paycheck.

But, when you tell your customers you’re raising their prices out of the blue (especially with no added benefit or value to make it worth it), they will be asking themselves whether or not they REALLY need your subscription/service/product.

And, just like that, you’ve lost one of your most valuable subscription tools: complacency.