The Nice Way to Increase Prices in 5 Steps
Posted by Guest Author on March 13, 2013 in Sales 2.0 [ 0 Comments ]
Approaching a buyer for a price increase can be daunting, not least for the prospect of losing their customer.
Unfortunately, sometimes this is essential, whether it’s caused by inflation, the cost of your supplier increasing their rates, or a project that has become more complex than was originally anticipated.
Whether your customer understands these reasons or not, you want to stick to 5 basic tactics:
- Give notice
- Approach the buyer in person
- Be open to negotiation
1 & 2: Give Notice and Approach
Let your customer know as soon as you’ve made the decision to implement an increase; a buyer will always appreciate having time to ascertain the impact on their business.
Approaching your customer and giving them plenty of notice will show them that you value and respect their business, and they will appreciate the honest and open approach, standing you in good stead for maintaining a strong relationship.
3. Justify, Justify, Justify
Take a systematic approach; calculate exactly how much of an increase you need to propose and draw up a clear and concise list of reasons that show why you need to do this.
Be sure that all the strategic information about your customer’s business is accurate and time to think about why they employ your services; it may strengthen your case to reinforce these points when you present.
- Why they buy from you?
- Whether they can get the same service elsewhere at a lower rate?
- What percentage of their business relies on your service?
Knowing your stuff inside out will give you the confidence and ability to present a clear case and reach a mutually beneficial agreement.
4. Be Prepared to Discuss
Any buyer understands that price increases are a part of business, and a 5 or 10% increase is unlikely to shock them.
However, this probably won’t stop them from trying to resist your proposal, particularly if they will need to approach their customers for an increase in turn. Provided your decision to increase your prices is a considered one, you should be open to sit down and discuss this with the client.
So, what happens if your client comes back with an offer of a reduced rate?
Well, it’s a good idea to work a buffer into your original proposal to account for this scenario. Many buyers work on the premise that their supplier has put in a higher cost than they expect to receive.
If this is the case, you will need some room for manoeuver to keep the sales flow going. A few scenarios to keep in mind:
- Often, people go in as low as they possibly can so as not to frighten off the client, but if you do this, you run the risk of being unable to negotiate and it’s likely that a buyer would misinterpret this as inflexibility or disinterest in their business.
- Occasionally, you may get a buyer who is reluctant to even negotiate. In this scenario, it’s important to maintain your walk-away power. This is particularly difficult to do, but it’s better to walk away from a sale than make too large a compromise on your product or service.
There’s no two ways about it, when someone is told they need to start paying more than they are accustomed to for a service, its bad news. But with the right approach, you can take the sting out of it. Bear in mind the above points to ensure you maintain faith in your service, whilst reaching an agreement that both you and the buyer are happy with.
Bio: This article was contributed by Laura Moulden on behalf of Nixon Williams; a specialist firm of accountants for contractors.