Even the most sales savvy among us have had to fight back
the nerves that materialize whenever we are faced with telling a
customer about a price increase. Talking about it never makes
for an easy conversation. When discussing a price increase in a
business-to-business environment, it is important to remember
that our customers have probably had to have the same discussion
with their own customers. A company exists only as long as it
earns a profit and it can only do that if it delivers a quality
product or service at the right price. This means that the key
to any conversation about raising the price is to emphasize that
such an increase will ensure product quality.
As you begin to prepare your strategy for communicating a price
increase, ask yourself the following questions:
- Does the customer
take your product/service and add a standard
percentage increase in price when selling to their
customers? If this is the case, you can point out
that your customer will make more money by taking a
standard percentage of a higher amount.
- What percentage of
the customer’s business is your product/service? If
the percentage is small, tell them that the amount
of increase is only a small percentage of their
total business. If the percentage is great, then you
can emphasize that the price increase is necessary
to maintain the level of product quality necessary
for them to serve their customers.
- Has the customer
faced any other price increases from other vendors?
If so, try to identify what some percentages of the
other increases have been. If yours falls into the
low end, then you can point out how your increase is
comparatively smaller than that of many others. If
your increase is at the high end, you can either
explain how yours is the only one you expect to take
or that you wouldn’t be surprised to see others
coming back to take another round of price
increases.
- How does the
customer view you and the products/services you
sell? If you have a quality reputation and record,
then you can emphasize that the increase has been
carefully thought through and it is only being taken
to ensure continued quality. If you have a spotty
record with the customer, then you should stress how
the price increase will allow you to begin
addressing some of the issues in question by
allowing you to improve the overall quality of
service they have been receiving. Naturally, it is
important to make sure all comments are backed with
a commitment to follow-through.
- Will the customer
raise an issue with the price increase? Be prepared
to show documentation of how your costs have
escalated and how other companies are experiencing
the same increases. (An example is the increasing
cost of oil, which has forced any company that uses
petroleum in the manufacturing or transportation of
goods to most likely increase prices.) When having
this discussion, be sure to show empathy for the
customer, but remain firm in what you’re saying. If
the customer senses any hesitation on your part,
they will likely try to exploit it in the form of a
price concession from you. Also, be prepared to
share steps that your company has taken in an
attempt to avoid a price increase. This can include
ways you’ve already cut costs or how the price
increase is the only way to maintain the quality and
service the customer expects. A final point to
emphasize is the time lag between this price
increase and the previous increase. Having
information available concerning the rate of
inflation during that specific time period may also
help diffuse the issue.
- Why does the
customer buy from you anyway? Knowing this will
allow you to reinforce these points when talking
about the price increase. You should also have
ready at least two key needs of the customer that
your product or service satisfies. Be sure all of
your strategic information about the customer is
up-to-date before a price increase is announced.
- How much business
is at risk from the customer? We can sometimes get
carried away thinking that if we raise prices, we’ll
lose the customer, even though this is rarely the
case. Think through what steps the customer would
have to take to move to another vendor. Many times
the work involved in moving is not worth the effort,
and thus the business is less at risk than thought.
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The following Sales Presentation tips are the best practices to
employ when executing a price increase:
- Give the customer
lead-time. Provide the customer with enough notice
to allow them to make adjustments in their
information systems and to exercise at least one
more order at the existing price.
- Avoid showing
favorites. Pricing integrity is always essential,
but especially so during a price change. Do not
treat particular customers more favorably than
others in pricing during an increase. Different
pricing levels are fine as long as they can be
logically defended so that a customer who is not
receiving the price break can understand and accept
the price change.
- Do not allow your
customer to find out about a price increase from
your invoice. Any changes in pricing must come from
the account executive or a person of high position
within the company. Information regarding a price
change should only appear on an invoice after every
person involved has been personally notified.
(Sufficient time should occur in the price increase
timeline to allow at least one invoice to contain a
note of the pending increase in price.)
- Make sure each
customer service representative and anyone else who
comes in contact with the customer is fully aware of
when the price increase is going to be communicated.
One of the most significant possibilities for
confusion is when the customer hears conflicting
information from different departments. Everyone in
customer service needs to be fully aware of the
price increase, the reasoning behind it, and the
logistics for implementation. They should also be
provided with a FAQ guide to ensure that when
customers do ask them about elements of the pricing
increase, they are able to share accurate
information.
- Believe in the
price increase. In order to be paid what you are
worth, you must charge what you are worth. Although
this is not something that can be explicitly
communicated to the customer, this general sense is
what sets apart the best practice companies and
high-performing sales professionals.
- Instill an
open-phone/open-door policy. Any time a price
increase takes place, it is important for all senior
executives to be willing to answer a phone call from
a customer or to make phone calls to key customers.
For successful consultative selling, nothing sends
a stronger signal to a sales organization than
seeing their senior executives on the front-line
when dealing with a price increase.
- Before and after
the price increase, monitor the sales patterns of
your individual customers. It is important to
quickly catch any changes that occur as a result of
the price increase.
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During the 1970’s and 1980’s, price increases were common and
expected. In the past 10 years, however, we’ve all grown used
to lower inflation and the overwhelming impact of Wal-Mart’s
philosophy on pricing. Today, price increases are again growing
more common and acceptable as long as they are well thought
through and not seen as a way to merely increase profits.
Because they are an inevitable part of business today, we can’t
let ourselves avoid dealing with price increases. Instead, we
should seek to use them strategically to increase our selling
potential.
Mark Hunter, “The
Sales Hunter”, is a motivational sales speaker and industry
expert who addresses thousands each year on how to increase
their sales profitability.
For more information on his sales training or to receive
a free weekly sales tip via email, contact “The Sales Hunter” at
www.TheSalesHunter.com.
Reprinting of this
article is welcomed as long as the following is included:
Mark Hunter, "The Sales Hunter",
www.TheSalesHunter.com,
© 2007
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