As inflation and supply chain challenges continue many companies are experiencing raw material increases, they simply cannot absorb anymore.
How do we deliver strategic price increases that stick?
Each of my clients have experienced raw material and service increases far exceeding what they can absorb, and they must pass along some, if not all, of the increases to their customers.
What do we need to know to deliver strategic price increases?
Timing
History
Price and boundaries
Your negotiation style
Buyer’s negotiation style
Strategic considerations
Data by item by customer
Training
Timing
Now is the best time to raise prices since most companies are doing so. However, you need to review when was the last price increase? How has your performance been? You may not want to raise prices today if your customers are not satisfied with the buying experience.
History
When was the last price increase? What did you experience with this customer the last time you increased prices?
Price and boundaries
Do you know the price sensitivity of your products based on data? What is the market price for your product or service? Do your customers have a contract and does the contract have a price escalation clause? How many contracts are old and need to be updated? When does the contract renew?
Your Negotiation Style
When we work with teams, we help their salespeople understand their personality style and how that will impact their negotiations.
Buyers Negotiation Style
Just as your team members all have unique personality styles and process information and conversations differently, your buyers do as well. We must recognize their negotiation style early and adapt.
Strategic Considerations
Here we review things like does the customers buy 100’s of items from you or less than 12? How hard would it be for the buyer to replace your product or service? What are your competitors doing? Are your products and services priced by market vertical served?
Data
Now is the time to capture the cost of sale. You know your raw material costs and your margins, but we must capture the cost of sales by customer and develop a net profit by customer by product report. You will find 20% of your customers, after we consider the cost of sales, are profit leaking accounts. Strategically price products by customers to drive net profit increases including the cost of sale.
Training
Train your team on how to deliver price increases professionally. Provide them skills training on negotiations and how to handle objections.
The above are key considerations when implementing a price increase.
If your team needs help strategically delivering price increases that stick, let’s schedule a call.
