Price Increases to Your Customers
Eek! Price increases from
several of your suppliers! Your customers won't like
that. How do you manage to pass on that price increase
without losing business or giving away margin dollars?
This is becoming a major issue for distributors. The
economic pendulum has inevitably reached its apex and
begun to swing back in the other direction. In many
industries the pressure to reduce prices is coming to an
end, being replaced by upward pressure on prices. If you
are like most segments of the economy, there have been
more price increases announced in your industry in the
last three months than in the last three years combined.
Unfortunately, many sales forces are peopled with
individuals who have never lived through a time of price
increases. They have no frame of reference from which to
view it, and no experience on which to draw.
Anxiety abounds: "Will the customer refuse to
accept it? Or solicit prices from a competitor? Will I
have to give away gross margin and absorb the price
increase in order to keep the business?" These
kinds of doubts lead to anxious and intimidated sales
people, declining sales and shrinking margins.
Not a pretty picture. Yet, as in any sales problem,
there are a set of proven practices and strategies that
will make this process of managing and communicating
price increases less threatening. Here's a series of
seven specific ideas to help you effectively manage
Remember, no one likes price increases, but they are a
fact of life. As a professional salesperson, you can
manage this process with excellence or you can allow it
to upset you and your customers. Implement these seven
strategies and you will handle the inevitable price
increase with finesse and confidence.
- Set up the situation.
The announcement of an 8% price increase on a major
product line shouldn't come unexpectedly out of the
blue. Of course the customer is going to react
strongly to the suddenness of the information.
Nobody likes to receive price increases, and even
worse, nobody likes to receive them without any
indication that they are coming.
It's like the day I received a bill for health
insurance which was 60% higher than the previous
month was. No prior notice, no hint of the increase,
no letter explaining it was on the way, no
preparation - just a much higher premium. I reacted
conventionally, and immediately picked up the phone
to complain and solicit other sources. The sudden
nature of the bad news fueled my negative reaction
just as much as the details of the increase.
Don't let that happen to your customers. Don't wait
until the price increase is a fait accompli to
inform the customer. Weeks before, have a
conversation with that customer about the trends in
the economy toward more price increases. Share the
big picture with him. Then mention other price
increases that you have received in the past few
months. Be specific with names of manufacturers and
products to which he can relate. Mention the soaring
price of oil and the inevitable downstream effect
that has on all kinds of products. Mention that you
are expecting an increase from XYZ component or
Build into your customer the general expectation
that prices are going to go up, so that when the
deal happens, he isn't blind sided by the
- Prepare with details and substance.
You don't want the customer thinking that it's just
your word that the prices are going up. Bring the
details. Have a copy of the letter from the
manufacturer indicting the price increase. Be
prepared to communicate specific details. Don't say,
"Transportation charges have gone up about
20%." Instead say, "Due to the rising cost
of fuel, our inbound freight charges have been
increased by 19.1% from one truck line and 18.6% by
another. Here's the letters from each of them
informing us of the increase."
This is a great time to have the manufacturer's rep
come with you. Let him/her communicate the bad news
to the customer, while you look grave, concerned and
sympathetic in the back ground.
It's always a good idea to have someone else, other
than you and your company, as the source of the
price increase information. This conveys to the
customer the fact that you are not raising prices;
you are reacting to your prices being raised. That
is a significant message to get across.
- Try to inform your contact's boss of the price
You want to avoid this scenario: You pass on a price
increase to your key contact. He/she is fully aware
of your need to pass along the increase. However,
when he tells the boss about the price increase, the
boss, who doesn't know all the details, reacts by
directing your key contact to shop for a better
price, or refuse to pay the higher price.
Instead, you be the bearer of the bad news to the
boss. Handle the sales call in the same way that you
did with your key contact - lots of detail, with a
third party being the source of the price increase
The result may or may not be the same, but at least
you haven't put your key contact in the difficult
position of defending his decision to continue to
buy the product from you.
Also, it may be that the boss is likely to be a bit
older than your key contact. If that is the case,
it's more likely that the boss has lived through a
time of regular price increases. It will come as
less of a trauma to him, because he has seen it
before, then it will to the younger, less
experienced contact who may have, like your many of
your sales people, no experience with price
- Give at least 30 days notice.
Don't ever communicate a price increase after the
fact. And don't wait for an order to say, "Oh,
by the way, the price of that is now...."
Instead, give the customer 30 days to enter the
information on their computers, to adjust their
purchase orders, and to consider alternatives.
Be sympathetic to your customers' situation. This is
a case when the golden rule, Do onto others as
you would have them do unto you, should be your
- Take the initiative and offer alternatives.
If you sense that the price increase is going to
prompt the customer to search for an alternative,
take the initiative and offer an alternative. Do a
little research. If the company is buying the high
priced option, and that is going up by 6%, as you
transmit the details of the price increase, suggest
that he may want to review a less expensive
alternative. Have the alternative product ready to
discuss with the customer.
This does a number of things. It communicates to the
customer that the price increase is a done deal -
the only option is to buy a product of lesser
quality. There is no option to beat down the price
increase. So, you get the customer thinking of
Secondly, it allows you to decipher the mind of the
prospect. If given the option of considering a less
expensive alternative, if the customer shows no
interest in the option, it's a good indication that
he's going to accept the price increase, and not
Third, if the customer bites on the less expensive
alternative, then you are still in the game. It's
better to retain the customer with a less expensive
alternative, and maybe loss a little sales volume
and gross margin dollars, then it is to lose the
customer and walk away with nothing.
- Make it easy for the customer to implement the
Make it easy for him to input the new information on
his computer, to adjust his purchase orders, to note
his requisition cards. The easier it is for him to
implement the mechanics of the price increase, the
more likely he will do it. If the customer is buying
15 items in a line from you, don't just say the
prices are going up by 6%. Instead, give him a
spread sheet with each of the item numbers on it,
the old price per unit, and the new price per unit.
If you make it difficult for him to implement -- he
has to look up the item numbers that are affected by
the increase, he has to figure out the new price of
each item, he has to communicate it to the using
department, etc. - you make it more likely that
he'll balk at that effort and resist the price
- Be confident and matter of fact.
Price increases are a fact of life at certain points
in the economic cycle. Nobody likes them, but no one
customer can stem the tide. So, your customer has to
adjust to the fact of rising prices, just like you
and your suppliers do.
Understand that. Be confident in it. If you are
tentative, timid and intimidated by the price
increase, you'll stimulate lots of push back from
the customer. That push back is doomed to take up a
lot of your time and the customer's time. You'd both
be better off just accepting the fact of life that
prices are going up, adjust, and go on with your
That should be your attitude. Convey it in your
demeanor, in your attitude and in your conversation.
Be confident and your customer will likely react in
like manner to you.
About Dave Kahle, The Growth Coach®:
Dave Kahle is a consultant and trainer who helps his
clients increase their sales and improve their sales
productivity. He speaks from real world experience,
having been the number one salesperson in the country
for two companies in two distinct industries. Dave has
trained thousands of salespeople to be more successful
in the Information Age economy. He's the author of over
1,000 articles, a monthly ezine, and six books
Secrets of Time Management for Salespeople and Transforming
Your Sales Force for the 21st Century. He has a
gift for creating powerful training events that get
audiences thinking differently about sales.
His "Thinking About Sales" Ezine features
content-filled motivating articles, practical tips for
immediate improvements, useful resources and helpful
tips to help increase sales. Join for NOTHING on-line at
You can reach Dave at:
The DaCo Corporation
3736 West River Drive
Comstock Park, MI 49321
Phone: 800-331-1287 / 616-451-9377