Selling a Price Increase in a B2B Environment

By Mark Hunter –  

Even the most sales savvy among us has had to fight back the nerves that materialize whenever we are faced with telling a customer about a price increase.

Talking about it never makes for an easy conversation. When discussing a price increase in a business-to-business environment, it is important to remember that our customers have probably had to have the same discussion with their own customers.  A company exists only as long as it earns a profit, and it can only do that if it delivers a quality product or service at the right price. This means that the key to any conversation about raising the price 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, tell them 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 yours falls into the low end, then you can point out how your increase is comparatively smaller than that of many others. If your increase is at the high end, you can either explain how yours is the only one you expect to take or 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 quality reputation and record, then you can emphasize that the increase has been carefully thought through and it is only being taken to ensure continued 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 improve the overall quality of service they have 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 escalated and how other companies are experiencing the same increases. (An 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.
  6. Why does the customer buy from you anyway?  Knowing this 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 Sales Presentation tips are the best practices to employ when executing a price increase:

  1. Give the customer 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.
  2. Avoid showing favorites.  Pricing integrity is always essential, but especially so during a price change.  Do not treat particular customers more favorably than others 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. 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 within the company. Information regarding a price change should only appear on an invoice after every person involved 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. 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 confusion is when the customer hears conflicting information from different departments.  Everyone in customer service needs to be fully aware of 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 you are worth, you must charge what you are 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. Instill an open-phone/open-door policy.  Any time a price increase takes place, it is important for all senior executives to be willing to answer a phone call from a customer or to make phone calls to key customers.  For successful consultative selling, 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. Before and after the price increase, monitor the sales patterns of your individual customers.  It is important to quickly catch any changes that occur as a result of the price increase.

Today, price increases are again growing more common and acceptable as long as they are well thought through and not seen as a way to merely increase profits.  Because they are an inevitable part of business today, we can’t let ourselves avoid dealing with price increases. Instead, we should seek to use them strategically to increase our selling potential.

 

Mark Hunter, The Sales Hunter, is author of “High-Profit Selling: Win the Sale Without Compromising on Price.” He is a consultative selling expert committed to helping individuals and companies identify better prospects and close more profitable sales. To get a free weekly sales tip, visit www.TheSalesHunter.com. Read the first chapter of his instant-classic “High-Profit Selling” here.