|
Selling a Higher Price in a B-B Environment
Even the
most sales savvy among us have been there: fighting back the nerves that
materialize whenever we are faced with telling a customer about a price
increase.
Talking about a price increase never makes for an easy conversation. When
discussing a price increase in a business to business environment it’s
important to bear in mind that our customer has probably had to have the
same discussion with their own customers. A company exists only as long as
it earns a profit and a company can only earn a profit long-term if it
delivers a quality product or service that is priced right. This means the
key to any price increase conversations is to emphasize that such an
increase will ensure product quality.
As you begin to prepare your strategy for communicating a price increase,
ask yourself the following questions:
1. 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 make more money by
taking a standard percentage of a higher amount.
2. What percentage of the customer’s business is your product/service? If
the percentage is small, point out that the amount of increase is only a
small percentage of their total business. If the percentage is great, then
you can emphasize that the price increase is necessary to maintain the
level of product quality necessary for them to serve their customers.
3. Has the customer faced any other price increases from other
vendors? If so, try to identify what some percentages of the other
increases have been. If your price increase falls into the low end, then
you can point out how your increase is comparatively lower than many
others. If your increase is at the high end, you can explain how your
increase is the only one you expect to take; or you may point out that you
wouldn’t be surprised to see others coming back to take another round of
price increases.
4. How does the customer view you and the products/services you sell? If
you have a reputation and record of quality, then you can emphasize that
the increase has been carefully thought through and that the increase is
only being taken to ensure continuing quality. If you have a spotty record
with the customer, then you should stress how the price increase will
allow you to begin addressing some of the issues in question by allowing
you to increase the overall quality of service the customer has been
receiving. Naturally it is important to make sure all comments are backed
with a commitment to follow-through.
5. Will the customer raise an issue with the price increase? Be
prepared to show documentation of how your costs have increased and how
the same increases your company is facing are being dealt with by other
companies. (One example is the increasing cost of oil, which has forced
any company that uses petroleum in the manufacturing or transportation of
goods to most likely increase prices.) When having this discussion, be
sure to show empathy for the customer, but remain firm in what you’re
saying. If the customer senses any hesitation on your part they will
likely try to exploit it in the form of a price concession from you.
Also be prepared to share steps that your company has taken in an attempt
to avoid a price increase. This can include ways you’ve already cut costs,
or how the price increase is the only way to maintain the quality and
service the customer expects. A final point to emphasize is the time lag between this price increase
and the previous increase. Having information available concerning the
rate of inflation during that specific time period may also help diffuse
the issue of the price increase.
6. Why does the customer buy from you anyway? Knowing the real reason(s)
the customer buys from you will allow you to reinforce these points when
talking about the price increase. You should also have ready at least two
key needs of the customer that your product or service satisfies. Be sure
all of your strategic information about the customer is up to date before
a price increase is announced.
7. How much business is at risk from the customer? 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. Many times the work involved
in moving is not worth the effort, and thus the business is less at risk
than thought.
The following are best practices to employ when executing a price
increase:
1. Give the customer lead-time. Provide the customer with enough notice of
the lead-time to allow them to make adjustments in their information
systems and to exercise at least one more order at the existing price.
2. Do not show favorites. Pricing integrity is always essential, but
especially so during a price change. Do not treat particular customers
more favorably in pricing during an increase. Different pricing levels are
fine as long as they can be logically defended so that a customer who is
not receiving the price break can understand and accept the price change.
3. Invoicing integrity. Do not 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 in the company.
Information regarding a price change should only appear on an invoice
after every person involved at the customer has been personally notified.
(Sufficient time should occur in the price increase timeline to allow at
least one invoice to contain a note of the pending increase in
price.)
4. Customer service blunders. Make sure each customer service
representative and anyone else who comes in contact with the customer is
fully aware of when the price increase is going to be communicated. One of
the most significant possibilities for customer difficulty during a price
increase is the potentially confusing information they hear from different
departments. Everyone in customer service needs to be fully briefed on the
price increase, the reasoning behind it, and the logistics for
implementation. They should also be provided with a FAQ guide to ensure
that when customers do ask them about elements of the pricing increase
they are able to share accurate information.
5. Believe in the price increase. In order to be paid what we’re worth, we
must charge what we’re worth. Although this is not something that can be
explicitly communicated to the customer, this general sense is what sets
apart the best practice companies and high-performing sales professionals.
6. Open-phone/open-door policy. Any time a price increase is taken, it
is important for all senior executives to be willing to take a phone call
from a customer or to make phone calls on key customers. Nothing sends a
stronger signal to a sales organization than seeing their senior
executives on the front-line when dealing with a price increase.
7. Monitor orders pre- and post-price increase. Make sure order patterns
are closely monitored for the sales cycle leading up to the price increase
and the sales cycle following the price increase. It is important to catch
quickly any changes in ordering patterns at the customer level due to any
price increase, and monitoring this information in total will not allow
you to see customer changes fast enough.
During the 1970s and 1980s, price increases were common and expected.
During the past 10 years, however, we’ve all grown used to lower inflation
and the overwhelming impact of Wal-Mart’s philosophy on pricing. Today price increases are again growing more common
and acceptable so long as they are well thought through and not seen as a
way to merely increase profits. As an inevitable part of business
today, we can’t let ourselves avoid tackling price increases; instead we
should seek to use them strategically to increase our selling potential.
|
