Increase price and boost your business

Increase price and boost business

Increasing prices are a fact of life, and in the race to retain customers, price increases are often the biggest hurdle to overcome. So, how can you prepare your salesforce to have the inevitable price-increase discussion without damaging the relationships your company has with its clients?

 

Change your mindsets, for a start. Price increases are an opportunity to remind clients of the value your company and solution provides, and reinforce all the positive experiences the client has had with your company over the years. Everyone wants to maintain or lower prices, but what customers need is dependable supplier relationships that provide high value and contribute to overall bottom-line profitability. 

 

SiriusDecisions’ 2015 buying study offers figures you should take to heart and keep with you as you enter price-increase discussions:

 

34% of business-to-business buyers surveyed rate previous experience with a company as the most important decision driver for working with a service or product provider.

 

And …

 

Only 8% of buyers opt for the cheapest option when making buying decisions, which puts a high-value provider in a very strong position 92% of the time[1].

 

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Table Source: SiriusDecisions https://www.siriusdecisions.com/Blog/2015/August/PriceNottheMostImportantDriverofBtoBBuyingDecisions.aspx

 

As an existing provider, you enter price-increase discussion in a strong position, but it is easy to see how these discussions could be volatile. No one wants to pay more, and certainly not for a product they already have, so it’s rarely a conversation a sales person wants to have. 

 

Here are 4 tricks to help you execute a price increase while maintaining relationships and saving your business.

 

Be empathetic

It’s no surprise your sales team will get push back from a client telling them to pay more. After all, who wants to pay more for an existing service just because it’s a new year?

 

If you haven’t prepared your client for an annual increase during your initial discussions, and even if you have, make sure you speak with the client face to face. Be empathetic. Be on their side. Invariably it’s the economy driving the increase, and showing you understand their situation will keep the mood buoyant.

 

Don’t apologize

There’s no need, and it suggests you feel the price is too high or that your product or service is not worth the new amount. It is. Have confidence in your product and your buyers will, too. Show any doubt that your product or service isn’t worth the price you’re asking for, and the buyer will start doubting it, too.

 

Know your numbers, know your value

Chuck Cohn of Varsity Tutors knows sales people have to justify why the price is going up. ‘Sometimes you need to raise your prices. Explain to your customers why you are raising your prices, and how you are using the additional funds they will be paying each month,’ he explains.

 

They will want to fight the increase, nonetheless – just as your buyers will have done when they faced your providers who caused the increase in the first place.

 

‘If your own expenses are going up, then explain to your customers why that is happening.’

 

Justify by adding more value or adding a new service. If you are spending more money on your product, then explain to your customers how the additional features will benefit them.’[2]

 

Be proactive

It’s good practice to have had the price-increase conversation in your initial sales discussions when you win the contract. That way, there will be no surprise and less resistance when the time comes.

 

Price increases should not be a surprise for your company, either. Plan price-increase conversations into your calendar.

 

In Visual Six Stigma by Ian Cox et al, the writers suggest watching market dynamics monthly to assess when price increases are going to be most successful – and get in ahead of other suppliers by beginning the conversation when the market is stable. It’s possible your business needs a ‘total re-engineering of the price management process’ to get the timing right.

 

Value is key

During the couple of months before the price increase, over-deliver on your service, making your client aware of the value they receive by having you as their supplier.

 

Being aware that you’ll have to bump prices also gives you the chance to offer your customers a chance to buy a ‘higher-tier plan before prices go up,’ suggests Jared Brown of Hubstaff. ‘You'll get a nice bump in revenue from these early upgrades, and your user base will be happy that they got a chance to buy before the price increase. 

 

You could also consider offering a discount in certain circumstances. For instance, if they increase their order, some prices could be lowered, or a higher-priced element could be added. Offering them the option to negotiate the price and/or terms enables them to feel they are getting great value for money.

 

Give your client the feeling of control

Customers that feel in control are far less likely to feel like they have to fight. Researchers at Northwestern University examined trust building in negotiation and found that “When talks begin, both sides are likely to be apprehensive about being exploited if they are too cooperative, if they reveal too much information, and so on.” [3]

 

The Negotiation Program at Harvard Law School explains in its blog that “Each negotiators’ willingness to make tradeoffs at the bargaining table depends, in many respects, on her expectations that her tradeoffs will be met with equal, reciprocal moves. In integrative negotiations, where creating value for yourself and your opponents trumps purely distributive motivations often found in haggling negotiations, using tradeoffs to create value not only signals a negotiator’s earnestness for negotiated agreement, but also leads to more reciprocal moves on the part of her counterpart.”[4]

 

So offering your client the feeling of the control in the first place will lower their defences from the off.

 

You can do this by offering a lower price option, maybe by asking them which elements of the service or product they could do without. This approach will also help you to better serve their needs and give your customer a choice by putting the value of the full-priced product front and center.

 

With these few tricks, you’ll stay ahead of the game by making your client feel supported by excellent customer service, which will keep them on your books for years to come and increase your revenue from them at the same time. Win-win, right?

 

Sources:

[1] SiriusDecisions https://www.siriusdecisions.com/Blog/2015/August/PriceNottheMostImportantDriverofBtoBBuyingDecisions.aspx

[2] The Young Entrepreneur Council, 10 Ways to Raise Your Prices Without Losing Customers

 http://www.inc.com/young-enterpreneur-council/10-ways-to-raise-your-prices-without-losing-customers.html

[3] http://www.pon.harvard.edu/daily/conflict-resolution/getting-off-on-the-wrong-foot/ 

[4] http://www.pon.harvard.edu/daily/win-win-daily/get-off-on-the-right-foot/

 

Last Updated: 23 March 2017

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