LinkedIn0 0shares Anyone who sells a commodity knows how tough it can be to increase their price. Customers can be very quick to move to a new supplier if they can get it cheaper. You have to either allow your margins to be cut or get the customer to go along with a higher price. The goal is to not to try to find a way to cut your margins but rather to find an alternative approach that you might be able to leverage with your customers.
Use these five strategies to avoid a customer exodus.
This is a real fear and is often based upon past experiences. However, when you face increases in operating costs, raw materials, labor expenses and so on, at some point you may have to raise prices. Survival means getting it right, though.
You need to keep up your volume of sales--avoiding a customer exodus--while using a price increase to sustain the necessary margin. When you do need to raise prices, try using these strategies. Customers can better deal with a price increase if they know the new price will hold steady for a while.
When make frequent, little increases, you create uncertainty--and that has more adverse consequences a single large raise that customers can plan around. Offer Short, Clear Explanations When explaining a price increase to customers, make certain that you have a short, straightforward, and common-sense explanation.
You and your sales people will be asked, so make certain that everyone has the right and same answer. Just know how to explain your reason.
Play Favorites You should personally contact some of your most important customers--those who are larger or more strategic, or both--to explain the change. A price increase, even if understandable, is still going to be seen as bad news--so it should be communicated executive to executive, not couriered by front-line people.
When Possible, Offer Options Sometimes you can change service agreements or performance clauses--or even product features--to offer some price relief. If these options are available to you, you should consider opening up the conversation. When "nice to have" bumps up against "need to have" with a price tradeoff, customers often change their definition of what they do in fact "need to have.
Manage the Internal Drama The employees who have the greatest amount of daily contact with your customers will hear the most feedback about any price changes.
They may have already faced regular pressure to reduce prices, and feel they did well to keep rates stable.
So now, when you ask them to pass along a price increase, they may, well, freak out. Your first and best explanation needs to be for your own team.
Your people need to understand the issues, the tradeoffs you considered, and the message. Tell them one story and then ask them to tell customers something different.
You need to have a single explanation--and by the way, it needs to be true. Price increases are a reality for many businesses.
With a plan you can keep your customers and keep your margins. Jun 19, More from Inc.Pick from These Six Alternative Strategies to Cutting Price: Increase your advertising; Introduce new products or services; Provide rebates or incentives (not the same as price cutting); Offer special product or service promotions (buy 2 get 1 free);.
You need to keep up your volume of sales--avoiding a customer exodus--while using a price increase to sustain the necessary margin. When you do need to raise prices, try using these strategies. 1.
If you’re selling a commodity and you announce a price increase without first having a strategy as to how to execute it, then you’re in a very weak position.
This is one of the reasons why every salesperson must be selling the price increase weeks a year. The wholesale price you pay for roasted coffee beans has increased by 25%.
You know that you cannot absorb this increase and that you must pass it on to your customers. However, you are concerned about the consequences of an open price increase.
Discuss three alternative price-increase strategies that address these concerns. Aug 13, · There are many signs it’s time to raise your prices: Your operating costs are going up. Obviously, when costs increase, you need to raise your prices to still make a profit.
You need to hire. Adding employees increases expenses, including salaries, employer taxes, equipment, office space, higher utilities, etc/5(5).
The wholesale price you pay for roasted coffee beans has increased by 25%. You know that you cannot absorb this increase and that you must pass it on to your customers.
However, you are concerned about the consequences of an open price increase. Discuss three alternative price-increase strategies that address these concerns.