How to Prep Your Customers for a Price Hike
The job of sales features its share of ups and downs, just like any other profession. There is the good stuff, like when customers become friends or that moment when you “bag the elephant” by coming up with the perfect solution for a client’s needs. What a great feeling! And then there are the negatives. Accounts Receivable collections might top that list. Salespeople hate calling clients for money that is overdue, and rightfully so. Sure, it, too, is part of the job but it’s nowhere near their favorite part.
Another line item on that “negative” list would be raising prices. Talk about uncomfortable conversations! It’s like selling a job that you already sold all over again. There you were, in the clear, having made a presentation, handled the objections, negotiated a price and closed the deal. The client felt good. You felt good. Your boss felt good. Now, you are going to need to open Pandora’s box. It’s as if you are saying to the customer, “I know we had an agreement, but it wasn’t good enough and I’m going to change it.”
It can be the recipe for relationship disaster and you risk everything from loss of trust in the account, to loss of the account altogether. There’s just something about a price increase that makes a salesperson wish he had listened to his mother and become a doctor.
Prime for Inevitable Inflation
We’ve been lucky these last few years. Low interest rates have made price increases extremely rare. But all that is about to change as the “I” word rears its ugly head: inflation. Costs are going up, starting with the cost of money. The Prime is on the move but not the kind that delivers packages in two days.
Business loans are more expensive. Material goods are too, due to a shift in the global trade balance and new tariffs on certain goods and raw materials, not to mention a few tit-for-tat taxes imposed by other countries. As a consumer, you’re about to see the cost of everything from plane tickets to Oreos tick upward, according to the Wall Street Journal.
Here’s another prediction. As a salesperson, there is a sales meeting in your future, one where someone in management delivers the bad news: “We are raising prices.” Perhaps this has already happened by the time you read this column but, if not, it’s just a matter of time. Airlines tend to raise prices all at once and the iconic black-and-white cookie enjoys a market share that allows it to slide upwards seemingly at will.
You want to move about the country or get your creamy filling fix? Pay up! Those salespeople have nothing to worry about.
If you had any sales training at all, you were probably taught to prospect, to manage your time, negotiation skills, how to close an order, beat voicemail, overcome objections and deliver an effective sales presentation. You might even have a certificate on the wall; proof that you’ve been through the arduous basic sales process. But how do you raise prices? How do you sit with a client and deliver the bad news in such a way that they remain a client?
Bearer of Bad News
No one teaches you that skill set. Registrants aren’t lining up for that “How to” seminar. You are given a percentage and a date and told to contact your clients. Meeting adjourned.
Too bad you’re not in “The Matrix.” If that were the case, Morpheus would simply upload a computer program into your brain. Your eyes would flutter a bit and then, armed with knowledge and confidence, you would look at Trinity and say, “Let’s go.” Naturally, you would take the company helicopter (best to let her handle it). But seeing as you are not The One, let’s run through a few rules and suggestions:
- Prepare ahead of time — It’s never a bad idea to remind your customer of your value. An account review, formal or informal, highlights the fantastic design work you have done as well as your on-time delivery record. Your key contact, be it a buyer or product manager or perhaps someone in marketing, will still need to explain the price increase to someone else. You can control this narrative by providing some bullet points, both in writing and verbally.
- Drop a few hints — Talk to the customer about their products and services. Ask about trends in their industry. Throw out the question, “How do your salespeople handle price increases?” Subtle? Probably not. But the conversation might give you good food for thought and soundbites for what might be a difficult conversation ahead.
- Get a reorder now — If appropriate, you might think about more than a hint and suggest to the customer that they place their reorder now before things get more expensive. This only delays the inevitable but at least it’s one more order under your belt.
- Role-play with your boss — The statement, “I’m here to talk about a price increase,” can only have so many replies from the client. Sure, they might accept it and take it in stride but, more likely, the response will be negative and you will have your work cut out for you. Preparing for that conversation by talking out all of the different possibilities with your boss is critical to your success.
Wait, success? What can possibly be successful about this situation? Isn’t this one of those times when the best you can hope for is to hang onto the customer and hope they quickly develop memory loss?
Playing Cancel Service Game
Years ago, a certain Printing Impressions columnist played a yearly game with Sirius XM Radio and the Wall Street Journal. Subscriptions for both services expired at about the same time. Here’s how the game went: Columnist called to cancel subscription. Sirius XM/WSJ panicked and immediately found a super discounted price in order to save the customer.
One year, the conversation with XM went as planned but when he called the Wall Street Journal, they stood by their price increase and explained why they were worth it and, in fact, the columnist was darn lucky to have them. Interestingly, today only the Journal remains on his list of vendors.
Successfully “selling” the price increase, while a challenge, is an opportunity for you to prove your worth. Sirius-ly, if you can’t pass along the higher costs that you have incurred, then you had little to no value at that account anyway. If it wasn’t this situation that knocked you out on the account, it would just be another one right around the corner.
This price increase is not an “if,” it’s a “when.” Start singing your own praises now. Be thinking about the client conversation and anticipate the words to use. If you are worth your price plus a little more, you’ll be fine.
If not, go sell for Sirius XM Radio. You can get a job there for a song.
For further information, please visit BillFarquharson.com