On this episode, Paul addresses the hot-button topic of price increases.
Words matter! Don’t use “increase,” use ______.
Detail the reason for the adjustment. Fairness is critical.
“The price adjustment creates an opportunity to ….”
Prior to the adjustment, remind the customer of the ______.
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How do I push through a price increase?
(Transcribed from podcast)
On today’s episode, we’re going to talk about price increases. If you’re like many companies out there, right now, you are going through a price increase. You’re trying to push through that increase and increase your profit, or at least cover some of the added costs that you’ve incurred over the previous year. So, we’re going to talk about that today. And this is a question I’ve actually received three different times in the past week.
Before we get into that question, a quick shout-out to Andrea over at The Creative Impostor Studios. When it comes to launching your podcast, if you need help figuring out what to do, how to do it, Andrea is here for you. She’s be happy to talk to you to help you launch your podcast. Even maybe talk about your idea, get things going. So, make sure you reach out to her. We’re going to have a link to her website on this episode’s webpage. Makes sure you check it out.
Also, make this your best sales year ever. And if you’re going to do that, you need to focus on the basics, the fundamentals. You’re going to need to figure out a way to add some value. So, pick up a copy of Value-Added Selling. We’re now in the fourth edition of the book. This newest edition is updated with several new chapters. It’s updated with our latest research, especially on price sensitivity. And also, one of the chapters in the book we’re actually going to mention today. The book, again, provides much more depth. It’s available wherever you get your books, Chapters, Barnes and Noble, Amazon. Just pick up a copy.
Let’s get back to that question: How do I push through price increases? I’m going to give you five ideas—things to think about—as you push through a price increase.
First thing, the words matter. The words you use will matter when you are pushing through that price increase. So instead of using the word “increase,” use the word “adjustment.” Adjustment is a more accurate term, and it sounds better than increase. From the buyer’s perspective, when they hear the term price increase or “our prices are going up,” that invokes a different response than adjustment. What they’re thinking when they hear prices going up, they’re just assuming either you’re making more money or your company is making more money, “They’re trying to make more profit.” That’s usually not the case. Most of the time when I hear about price increases, price increases are due to external factors. It could be currency fluctuations; it could be the price of raw material. It simply could be the cost of doing business, labor rates are going up. Any number of reasons will lead to a price increase.
And it’s usually not that the company is trying to make more money. What they’re trying to do is protect their current profitability. They’re trying to ensure that they can continue to operate profitably so that they continue to serve their customers and run their business the way they need to run it. So, use that word “adjustment” when you are introducing it to the buyer. Don’t use the word “increase.”
Tip number two: explain the context of the price objection. Think about your buyer, the person you’re delivering this price adjustment to. They need to understand why their price is adjusting upward. They need to know why the raw material costs are going up. They need to know why behind the labor cost or the external factors that are increasing their costs. They need to understand it.
And this plays into that role of fairness. On previous shows, I’ve mentioned that the number-one reason why buyers object on price is because of a perceived lack of equity. They just don’t think it’s fair. They don’t think it’s fair, what you’re charging, for the value that they receive. So, when it comes to price adjustments, the same is true. They need to understand why their price is going up, and you have to be able to explain that in a way that seems fair. Now, if your raw material costs are increasing, if your labor costs are increasing, then it seems fair that their costs would also increase. So, we’ve got to be able to explain it. Fairness is critical.
Tip number three. Going along those same lines of fairness, we need to remind the customer that everyone is going to pay the price adjustment. Everyone is going to be involved. No customers are going to be spared. When customers hear that, when they understand that everyone is going to be paying it and that it’s not like they’re just being singled out, it helps with that sense of fairness as well. So, point number three, make sure everyone will pay that increase.
Number four—and this is where we can talk about the opportunity of price adjustments. Look for other areas in their business where you can help decrease cost. This is an opportune time to reopen different ideas—ways you can help the customer save money.
I’ll give you an example. I was working with a group just a few weeks ago, and the topic of price adjustments came up. And I said, “Okay. You’re going to have to let your customers know their price is going to go up.” “Now that you’ve made them aware that their price is going to be adjusted upward—that their price is going up—they’re going to be more open to other cost-cutting ideas.” And so, I had the group think about other ways that can help reduce the customer’s overall cost.
One salesperson said, “You know, for months, I’ve been trying to convince my buyer to adjust their ordering patterns to use some of our purchasing services that will help them streamline purchasing, reduce invoicing, which helps reduce costs.” And I told that seller, I said, “Now is the perfect time to go back to that customer and say, ‘Look. Here’s what’s happening from a pricing standpoint.’ Reassure them everyone’s paying it. But also let them know, ‘I know you want to keep your costs low, so to offset this price adjustment, why don’t we look at ways that we can reduce invoicing and streamline some of your purchasing efforts?’”
And the customer was open to it. The actual price increase created an opportunity to reduce costs in other areas. So, keep that in mind.
And point number five, and this is going to be the biggest. This is the one thing you can do proactively to help soften the blow of that price adjustment. Ninety days before your price adjustment, go on a value-reinforcement campaign. On previous shows, we’ve discussed value reinforcement. Value reinforcement is simply reminding the customer of the value that you deliver and getting credit for the impact that it has on the business. Think about why we want to do this before the price adjustment takes place.
Leading up to that conversation where their price is going to go up, you can reinforce your value over a three-month period. You can remind the customer of all the value that you deliver through your documentation, through value reviews: simple value reminding where you’re thanking the customer for their business and then highlighting some of the value-added services that they have at their disposal.
You’re surrounding the customer with all the value that you’ve been delivering. That way when they experience that price adjustment, it’s not going to seem as bad. It’ll seem fair because we’ve already primed them to think about all the value that you have delivered. And the reason we have to do this is our customers just take our value for granted. As most people are unaware of the air they breathe, most customers are unaware of the value they receive. That creates a big problem because, if they don’t remember the value that you deliver, it’s like it never happened. And if it never happened, price becomes a bigger issue. So, we’ve got to remind and reinforce the value that we deliver.
So those are the five tips today. Again, use the word “adjustment.” Number two: explain the context of the price increase—or price adjustment, rather. Number three: reassure the customer that everyone is going to pay it. Number four: use it as an opportunity to look for cost decreases in other areas of their business. And number five: initiate a value reinforcement campaign.
Make it a big day.