Communicating Price Increases to Your Customers Without Losing Business
Recently, INSIGHT2PROFIT worked with a manufacturer that had not executed a price increase in nearly three years. There had been individual negotiations, but overall, pricing had remained relatively flat. While the company was a market leader, it was ignoring the pricing lever for profitability.
Our team worked with theirs to determine a plan for strategic price increases, as well as a process for conditioning customers to expect those increases. Here are the steps we took, which you can utilize to ensure your own success in communicating price increases to your customers without losing business.
Step 1: Start Addressing the Issue Informally First
You know sales is all about building relationships, so leverage yours. Instead of waiting for a letter to be sent to everybody, which does not make anyone feel like a priority, start reaching out. Whether it is over the phone or over lunch, start the conversation: “I wanted to let you know we are looking at a pricing initiative to better reflect the value our organization is providing.”
The more you can do to ensure your customers are not surprised with a price increase, the more successful you will be. Taking that a step further, developing a cadence for price increases can help guarantee pricing excellence: Communicating with your customers to an extent that they expect a price increase every year or six months (or whatever period fits your business model), the conversation shifts from “why are you raising prices?” to “what is the price increase?”
Step 2: Create Supporting Documentation
Given that it had been several years before the organization’s sales team had gone before a customer and said, “We’re going to raise our prices,” INSIGHT2PROFIT helped to build an extensive communication package. It covered a draft of the letter that would communicate the change to customers, as well as a sales script and FAQs personnel could use to combat concerns.
The purpose was not for reps to read the script or answers word-for-word, but rather to instill confidence in their responses. When the sales team used their own wording but projected the agreed upon message, fewer customers questioned the change.
Step 3: Role Play, Role Play, Role Play
If you have not completed a price increase in a number of years, you haven’t had that difficult conversation in a long time, and it can be hard to handle. That is why we insisted on a lot of role-playing with the company’s customer-facing staff members.
We got them into the room and said, “I’m the purchasing manager, you are the sales rep. Tell me why I’m getting an increase,” and they practiced. The first round was less than ideal. By the third iteration, the team had gained confidence and were incredibly convincing. Several of the staff told us how powerful the preparation was and that they knew exactly what to say when faced with an unhappy customer. Ultimately, they were confident enough to go into the marketplace and deliver the increase.
When practicing with your team, cover these bases:
- Read through the sales scripts, encouraging staff to use their own words
- Role play questions and answers
- Reiterate selling based on value, not price
After doing so, our client began getting 90 percent of what they asked for when, in the past, they historically achieved just 50 percent of their ask.
Step 4: Don’t Back Down
Continuing to educate and condition customers regarding your pricing initiatives is just as important as training your staff. The first time you cave when a customer pushes back, threatening to take their business elsewhere, you have set a precedent that will ultimately set your pricing initiative up for failure.
Think of it like giving in to a child because they were crying after being told “no.” If you roll prices back even once, you have taught your customer not to take your increases seriously. The better behavior is to remain respectful and professional while sticking to the increase.
There is obviously risk, and you may even lose a small amount of business. But we believe the bigger risk is backing off and setting a precedent for price locks.
The Bottom Line
While every industry’s preferred communication and tolerance for price increases differ, we often favor open communication, stating your case for value. Price increases do not need to be scary. To begin raising prices fearlessly, contact us.