Even the most confident among us have had to fight back our nerves when faced with telling a customer about a price increase.….
Over the last few months we’ve worked with sales teams who have been given this daunting task and have now pulled together a handy guide to make these conversations both more comfortable and effective!
We’ve divided the tips into 2 sections – preparation and meeting tactics.
Prepare for success
As with any ‘difficult conversation’ it’s important to prepare properly for these types of meetings – anticipating objections and developing tactics to explain why the increase is fair and reasonable can help both your own self-confidence and deliver the end result you are looking for.
So – ask yourself these questions…
- How can you explain that the price increase is ‘reasonable’?
I’ve put this first, because at the end of the day, most people do not want to appear unreasonable and it makes the conversation a lot easier if you can make it clear that the increase is based on fairness and logic.In our negotiation programmes, we always encourage participants to clearly position the price they are asking as reasonable – whether this is relates to the value your service delivers to the customer or your own costs.And this guiding principle is the same when asking for a price increase – so be prepared to clarify how your costs have escalated, how their competitors are experiencing the same increases or the rate of inflation during that specific time period. Accurate numbers are your friend here.
- Has your customer recently had the same discussion with their own customers?
Brilliant if they have – and you can use this information to kick the meeting off. If they are increasing their own prices, it makes it much more difficult for them to play the “this is unreasonable” card – although it doesn’t of course mean they will make it easy for you.
- 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 increase profits by taking the same percentage of a higher amount. Slightly cheeky, but true if their own competitors are facing similar increases.
- Has the customer faced any other price increases from other vendors?
If so, try to identify what the percentages of the other increases have been. If yours falls into the low end, then you can point out how your increase is smaller than that of many others. If your increase is at the high end, you may want to emphasise that you don’t want to drip feed a series of smaller increases.
- What alternatives does the customer have?
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 – how attractive is this option? – or for those of you who have been on our negotiation programmes – how strong is their BATNA (click here for a fuller explanation!)
Presenting your price increase
So – you have prepared your price increase strategy, but delivering a confident, respectful message if also important – so what are our top tips here?
- Confidence v Empathy
When having this discussion, be sure to show empathy for the customer – learn to understand how the customer feels about the increase, without agreeing with everything they say about it! However, make sure that your body language and voice are confident and aligned with the message. Position the meeting as a respectful communication, not the start of a negotiation!
- Believe in the price increase.
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 premis is what sets apart the best practice companies and high-performing sales professionals. If you believe that the increase is fair and reasonable – and you really understand the tangible business value you offer the customer- it will show!
- Have a clear structure for the conversation
It’s tempting to try and ‘slide’ the price increase discussion in at the end of a general account management discussion, however we’d suggest, if logistics allow, having this as a separate conversation, with a structure along the lines of:
a) Clarify the purpose of the meeting -“To discuss our pricing changes and agree with you how this will be implemented”. Ideally you will already have flagged this ‘purpose’ in advance as part of an email, so it is will not be a surprise.
b) Give some brief background behind the increase, with specific numbers where necessary e.g. cost of raw materials, length of time since last increase. Don’t spend too much time here, but this element is important to establish the increase as fair and reasonable.
c) Be clear about the increase (percentage or amount) as it impacts them.
d) Show empathy by recognising that they may not be happy with this, but make it clear how you have mitigated the impact of this for them as much as possible e.g. kept the increase low, bringing it in over a period of time etc.
e) End by emphasising how much you value their business and want to support them going forward. Then invite questions.
- Give the customer a reasonable 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.
- Be pro-active in both your external and internal communication
Never 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. It might not be possible to let every customer know with a face-to-face meeting or even a phone call, but even if you choose to put the increase in writing – e.g. via email – then the same principles apply!Internally, make sure that everybody who has a commercial discussion with the customer – including customer service reps – are fully aware of the price increase, the reasoning behind it, and the logistics for implementation.
Price increases, if handled well, can improve the quality of your customer relationships. If handled badly, they can lose you customers…
A small amount of preparation, having a clear rationale for the increase and finding the right balance between confidence and empathy can make a real difference in this key account management activity.
If you found this article interesting and would like to know more about how Greenbank can help you secure more meetings and build pipeline, then please contact us and we will be glad to help!