Yes, it can be a much easier sell to base a price increase on the increased cost of commodities that go into whatever it is your company produces.
The cost of energy is something many companies are quick to use the reason for a price increase. Price of fuel goes up, so logic says to use it as the reason for a price increase.
Here’s the problem: What happens when the cost of energy/fuel comes down?
Your customers are in tune with what is happening in the marketplace, so if they see energy coming down, they’re going to be quick to come back to you saying you need to lower your price.
Excuse me, but if I had to fight to get the price up, I’m certainly not going to roll-over and suddenly come down with my price.
When you take a price increase, regardless of what the reason, the additional income is increase to your gross profit. Taking a hit on your gross profit is certainly not the way to build a business.
When you are faced with taking a price increase due to higher commodity costs, you should position the increase based on the need to ensure you can continue to provide the same level of service the customer has come to expect from you.
Tie the increase to the value and outcome the customer receives from what you are providing to them, not the cost of what it takes to make it. Basing it on customer’s outcomes is a harder sell, but it gets you away from the commodity based price increase.
To make a price increase of this type work, you have to be very clear in understanding what value you bring to the customer. This means you have to understand your customer and know their needs BEFORE you talk a price increase. If you have been servicing the customer for a period of time, then you should have this information.
There are numerous other techniques you can use to help position the price increase. Too many to describe here in this blog post. I suggest you snag a copy of my book, “High-Profit Selling: Win the Sale Without Compromising on Price.” In fact, I devote an entire chapter in the book to how to take a price increase.
Copyright 2013, Mark Hunter “The Sales Hunter.” Sales Motivation Blog.