You know you need to take a price increase.
Costs are up and your profit margins are getting squeezed way too much.
Taking a price increase is the right approach, but you’re still hesitant in taking one for fear of losing business.
You are concerned that a price increase will cause good customers to go elsewhere and prospects to simply not look at you. It’s time to put those fears aside and get on with the plan of taking a price increase.
There is no reason to delay.
Putting off the increase because you are thinking things are going to change is simply not smart and here’s why: The vast majority of time when salespeople and companies say they’re going to delay a price increase due to some expected changes in the market, their real reason is based more on fear than the market.
Certainly I won’t disagree that taking a price increase can create stress, and that is why you need to think through the increase. Planning makes all the difference, and the sooner you can take the increase, the better.
Take the increase and don’t hold back on the amount of the increase.
The absolute worst thing you can do is to take an increase that does not achieve your overall business plan. The reason is simple – taking one too low will only force you to take another one sooner than you had anticipated. Talk about stress! A better approach is to make your increase for the full amount you need and do it without hesitations.
When you delay a price increase or take it for a less than optimal amount, you’re making several key mistakes.
First mistake is you’re allowing more time for you and your organization to come up with reasons why the increase should be delayed or the amount is still too high.
Second mistake is the negative impact it’s going to have on your bottom-line. Put aside the argument about how an increase is going to result in less business. Yes, put that argument aside, because when you introduce your increase, you’re going to have a sales strategy to demonstrate the value proposition to customers.
Lost business due to an increase is always far less than the naysayers would like you to believe. In fact, sometimes there is no lost business! The longer an increase is debated before execution, the more the naysayers are going to have time to whip people into a frenzy.
Key in communicating a price increase is not the comparison between you and your competitors. It’s about the outcome the customer is going to receive.
Keep showing how the customer benefits from you and your company. One of the best ways to do this is by showing them how you have benefited them in the past – or, if they’re a new customer, how you’ve benefited other customers.
Developing what I refer to as a customer outcome/value proposition strategy not only helps the customer see why the increase is valid, but also builds confidence in the salesperson.
For years I’ve said the biggest reason why increases fail is the lack of confidence the salesperson has in executing it. By developing a value proposition that is focused on the specific outcomes of each customer, you will build that sales confidence that is so crucial.
Regarding the lost profit, it is more important to acknowledge the lost profit that happens when the price increase is delayed. It’s much bigger than people realize. That profit loss is permanent. You can’t go back to a customer after the fact and expect them to pay more just so you can make more profit. The sooner you execute an increase, the sooner the bottom-line will begin to improve.
And the stronger your bottom-line, the more flexibility you have as a company to build your business even more. Weak companies are not in a position to take advantage of opportunities in the way that strong companies can. We only have to look at companies such as Apple and Dell. Apple, due to its financial strength, can do things Dell simply cannot do.
Executing a price increase comes down to the following:
First, determine the full amount of the increase. Don’t hold back. Plan for the future when determining the amount.
Second, set your date for the increase as soon as possible. Don’t give the naysayers time to build momentum.
Third, develop your value proposition at the customer level, focusing on each customer’s individual outcomes. Use your history of service as your benchmark. The stronger your customer outcomes/value proposition, the more confident the salesperson will be.
In my book “High-Profit Selling: Win the Sale Without Compromising on Price,” I offer more detail on how to develop and implement a price increase. Ultimately, there is nothing to fear with a price increase. Ironically, though, there is much to fear when a company consistently delays such increases. In fact, the damage to the bottom-line is quite scary.
Copyright 2014, Mark Hunter “The Sales Hunter.” Sales Motivation Blog. Mark Hunter is the author of High-Profit Selling: Win the Sale Without Compromising on Price.