Profit margins are the lifeblood of any successful marketing agency. Without healthy margins, it becomes increasingly difficult to invest in growth, reward your team, or weather economic downturns. One of the most effective ways to boost your profit margins is by adjusting pricing for legacy clients—those long-standing customers who may be paying less than your newer clients and generating slimmer margins. Here’s a financial playbook for maximizing profit margins by strategically raising prices for these clients.
1. Identify Underperforming Legacy Clients
The first step in this process is to identify which legacy clients are paying significantly less than your current rates and contributing to lower profit margins. It’s crucial to be strategic about this and avoid blanket price increases, which can alienate even your most loyal customers.
Steps to Identify These Clients
- Analyze Your Client List:
Review your client list to compare the rates that different clients are paying. Look specifically for clients who are paying below market rate or less than what your newer clients are charged for similar services. - Evaluate Profitability:
Beyond just looking at what they pay, consider the profitability of each client. Which clients are costing more in time and resources than they’re bringing in? These are the clients you’ll want to focus on for potential price adjustments. - Create a Targeted List:
Once you’ve identified these clients, create a targeted list of those who are both underpaying and underperforming in terms of margin. This list will be the basis for your outreach.
2. Approach Clients Individually
Rather than sending a mass email to all your clients announcing a price increase, it’s far more effective to approach each client on your targeted list individually. This personalized approach shows respect for the relationship you’ve built and gives you the opportunity to address any concerns they might have.
How to Initiate the Conversation
- Set Up a Meeting:
Reach out to each client on your list and request a meeting to discuss their marketing performance and pricing. Frame the conversation as a marketing review rather than just a discussion about price. This allows you to highlight the value you’ve provided over the years. - Express Gratitude:
During the meeting, start by thanking the client for their loyalty and partnership. Acknowledge how their business has contributed to your agency’s growth and emphasize that you value the relationship.
3. Highlight the Value You Provide
Before diving into the pricing discussion, it’s important to ensure that the client still sees the value in your services. Reinforce the benefits they’ve received from working with your agency and how you’ve helped them achieve their goals.
Key Points to Discuss
- Results Achieved:
Review the successes you’ve had together. Highlight key achievements such as increased leads, improved brand visibility, or higher conversion rates. This reminds the client of the tangible value you bring to their business. - Ongoing Support:
Emphasize the ongoing support and expertise you provide. Make it clear that you’re not just another vendor, but a strategic partner invested in their success.
4. Discuss the Need for Price Adjustment
Once you’ve reinforced the value you provide, it’s time to discuss the necessary price adjustment. Explain the situation transparently, focusing on the increased costs of doing business and the need to align their pricing with your current rates.
How to Present the New Pricing
- Explain the Market Reality:
Let the client know that, while new clients are paying a higher rate, you’ve held off on raising their prices out of loyalty. However, due to rising costs, it’s necessary to adjust their pricing to ensure that your agency can continue delivering high-quality service. - Offer a Compromise:
You don’t need to match their new rate to that of your newest clients, but you do need to make it clear that you require a small increase to maintain a sustainable profit margin. Emphasize that this adjustment is a win-win, allowing you to continue providing top-notch services. - Flexible Payment Options:
Offer to phase in the new rate gradually if the client expresses concern about the increase. This shows that you’re willing to work with them to find a solution that suits both parties.
5. Close with Confidence
Finally, present the new rate confidently and professionally. Most clients who value the relationship and the results you’ve provided will understand the need for an adjustment and agree to the new terms.
The Likely Outcome
- Positive Response:
In many cases, clients will appreciate the personalized approach and the opportunity to discuss their business with you. Most will agree to the price increase, especially if they’ve been satisfied with your services. - Strengthened Relationship:
By handling the situation thoughtfully and respectfully, you not only secure a better margin but also strengthen your client relationships. Clients are more likely to stick with an agency that values them and communicates openly.
Conclusion
Maximizing profit margins in your marketing agency doesn’t always require sweeping changes. By strategically raising prices for underperforming legacy clients, you can boost your bottom line while maintaining strong client relationships. Remember, the key is to approach this process thoughtfully, ensuring that your clients continue to see the value in your partnership even as their rates adjust to reflect the realities of doing business. a loyal, motivated, and high-performing team that is committed to driving your agency’s success.