As the post-pandemic landscape continues to reveal itself in today’s marketplace, price increases are a defining characteristic…and a pain point for many of us. In some markets, these increases are incremental bump-ups. But in others, the spikes are meteoric, due in large part to ongoing complications in the global supply chain.
Price increases—especially big ones—can pose challenges to sellers. As one client of mine explained recently, every time she gets on the phone with a customer, she’s having to ask them: “Do you want this week’s price…or next week’s price?” It makes them become the bearer of bad news to their customers…unless they’re properly prepared.
Here’s why: the price of a good or service is objective—it’s a number. But its value is subjective. Know the difference!
If you just treat a price increase as a matter of numbers, then all your customer is going to hear is that they’re expected to soon pay more for what used to cost less. Nobody’s ever happy about that! That’s why sellers who get caught up in that mindset end up having all kinds of frustrating discussions with clients about how much something is going to cost. And why.
Smart sellers, on the other hand, know they must reframe that conversation with their customers. Rather than allowing “price increase” to become the focus of the story, they’re skillful in redefining what value represents in that business relationship.
Remember: price is what someone pays for a good or service. But it’s not the underlying reason why they choose you. It’s your job as a seller—or as a leader of sellers—to define what those reasons are, and to make them part of your value-based selling strategy.
So, let’s look at how you, as a smart seller, must get down to business when dealing with a price increase—large or small.
Savings always matter.
Saving money is separate from spending money. One is a value, the other a cost. You must remind your customer of that fact. All businesses are highly motivated to save on overhead and operational costs. In fact, many employees in your customer’s organization are regularly incentivized to find those savings. But finding savings is about more than just trying to pay less for everything. Smart sellers recognize this. When they announce a price increase to their customer, they first prepare a fact-based case for how they can help them save money—even more than what would be achieved from a price discount. They do that by offering product upgrades or downgrades, product and service alternatives, differentiated services, or even a different way to use an existing product whose price is going up.
Show the hedge against risk.
Everyone wants to avoid risk in business. But, sometimes, people need to be reminded of where a legitimate risk really is, and provide them with a convincing strategy to hedge against it. If your customer is in a market that’s dealing with significant supply shortages, for example, they’re much more motivated to make decisions that reduce the risk of running out of much-needed items. Show them how a different product or a different way to use that same product requires far less supply, has a longer life, longer performance, and reduces the chance of having to shut down operations while waiting a long time for costly replacement parts.
Use the right unit of measure.
You’ve heard the adage, “measure what matters.” Your job is to define what matters. When the price of something is purely objective—to expand on an earlier point—your customer can only measure it in dollars. When it’s subjective—defined by the value a purchased good or service brings to an operation—then (and only then) you can use a better unit of measure. When you reframe, your conversation about price-per-part (for example) can become one about price-per-annum or price relative to total cost of ownership. You can also show them how your product or service—even at a higher price—helps them perform better relative to their competitors. For example, one smart agricultural seller I worked with showed how his premium product was priced less per acre even though it was more per ton compared to the commodity option. He was able to do so because the customer would need far less of the premium product. In this case, it made much more sense for the farmer and saved him money (while increasing performance) to buy the more expensive product.
Create an opportunity for a full operational review.
Use a price increase to conduct a business operational review. It can be a good way to uncover missing value that a customer is not capitalizing on now. When sellers operationalize the value, they show all the savings that can be achieved in shipping, equipment, training, services, fuel, parts, product consolidation, vendor consolidation, and safety. Highlight the global nature of an upcoming price increase and ask them how it’s affecting other parts of their business. All of this means you must take the time to fully understand every part of their business. Getting there requires legwork…which leads us to my fifth and final point.
Always be “inside” selling.
Insider sales skills are crucial for handling a price increase—and for gaining deeper insight into your customer’s operations. Use that gained privilege you have to show your customer that they’re more than just a transaction. Use phone, video, email, and texts to reach more people within your customer’s business. Give more than you take. Share insights about what’s going on in the marketplace from your perspective. Teach them about the risks of supply shortages, ongoing price increases, global market conditions, and what they can do to prevent that from affecting them.
Price increases happen. These days, they happen a lot. But how you handle them is crucial. It’s a significant differentiator between struggling sellers and smart ones. So, be ready to change your mindset, reshape your conversation with your customers, and remind them of all the reasons why they continue to choose you as their provider.