Are you Ready to Discuss Justification for a Price Increase With Customers?
It is no secret that costs are on the rise and that finding justification for a price increase is as easy as looking at everyday purchases. From higher grocery bills to soaring costs for the materials and resources required to produce and deliver products and services, we’ve all felt the impact of inflation and other factors that have steadily pushed prices up over the past year or so.
Your business has most likely felt the heat as well. While recession fears and speculation continue to bubble up, the economy has been plugging along, and that means your sales could be through the roof right now. But higher costs also mean your profits could be sinking down into the basement. And if you gave favored clients discounts or other pricing relief after the onset of the pandemic, those margins could now be perilously thin.
It may have been years since you’ve raised prices, but it’s time to take a hard look at the numbers. When costs eat into revenues and there’s no long-term expectation of things reverting back, it’s time to have that discussion about raising prices with customers.
But before you can give a price increase notice to customers, you have to make sure your leadership and sales team are aligned about how to tell customers about a price increase and to have those conversations sincerely and effectively. Don’t assume that they are. Considering it’s been over 40 years since inflation was this high in the U.S., most of your workforce has probably never experienced anything like this before.
There are a number of mistakes companies and salespeople can make when implementing and communicating the justification for a price increase with customers. Here’s what to avoid — and what to do to make it a smooth transition for everyone.
Positioning a Price Increase: Avoiding the Common Mistakes
The hallmark of successful salespeople is their ability to forge strong, trusted relationships with their customers. If these are long-term relationships, it’s possible the salesperson hasn’t had to engage in more complex conversations — like broaching the subject of a price increase — in a while. Now they’re facing headwinds that they’re not used to dealing with, and they may fall back on some unproductive behaviors as a result.
One mistake we often see is salespeople acting in what they view as an effort to protect the relationship by placing the “blame” on the company. You might hear them say things like, The company’s making me do this. I can’t believe they’re doing it, either. I’m so sorry. I’m on your side.
While they may be trying to appear empathetic, this approach not only ends up hurting the organization and future sales, it damages the salesperson’s credibility as well. Instead of safeguarding the relationship, it leaves the customer wondering what the real story is and whether this is a company they can trust.
Another tactic a salesperson might default to is the use of rebates or discounting “to make you whole.” This can seem like the easy way out, but it’s a short-term fix and not a strategic answer. When you try to absorb the price increase yourself, that has the longer-term effect of putting you in a price war or more competitive situations down the road.
These and other similar mistakes are rooted in the conversations salespeople are thinking to themselves all the time. A salesperson may be worried that the customer is going to be mad at them, for example, or that they haven’t provided enough value to the customer to justify a price increase. Another possibility may be that the salesperson simply does not have the confidence in their own abilities to have these more difficult conversations.
This leads us to another area that needs to be shored up before a price increase is rolled out to the customer base: leadership accountability, specifically as it relates to coaching and communication.
While most sales managers agree that coaching is critical to sales success, the reality is, many of them simply aren’t doing it. In most cases, it’s because they don’t understand what effective coaching really looks like or have the awareness and skills to coach their salespeople about the mental aspects of selling. It’s an issue that can often be traced all the way up the leadership chain. If leaders at all levels aren’t committed to a common definition of coaching and to doing it consistently themselves, then it’s not going to happen down the line.
When it comes to positioning price increases, this can also create a trickle-down problem with messaging. It takes consistent messaging internally to get the message right externally. If Sales is getting one message about the pricing strategy and Marketing is getting another, the supporting tools and materials provided to the sales team won’t align with what they’re communicating to their customers.
That can leave your salespeople frustrated, confused and reverting to discounting and other counter-productive tactics, rather than working to give customers valuable justification for a price increase.
4 Strategies for Communicating A Price Increase Notice to Customers
As mentioned above, salespeople who have really strong relationships with their customers may not have had to actually “sell” in a long time. Now they’re going to have to put their skills into practice (or develop them) so they can have these more difficult conversations.
Here’s the good news for salespeople: If you have a trust-based relationship where you’re viewed as a partner, it may not actually be that difficult of a conversation. You’ve done the work and built a strong foundation, so don’t assume the worst. What’s more, most customers are probably expecting this. After all, they’re seeing it everywhere else. But just because they know it’s coming, that doesn’t mean they’re happy about it. That’s where the salesperson’s skills come into play.
Focus On Customer Value
Just like any effective sales conversation or negotiation, discussing the reason for a price increase with a customer should not be a “we vs. them” discussion. It should be an exploration of what’s important to the customer, how the company and its products create value that is relevant to their needs, and what the true cost of disruption and change is. It’s a reminder to the customer of why they’ve partnered with you.
In other words, the focus of the discussion should be on the value proposition, not all the things that have caused the price increase. But remember, this has to start with leadership, because if they’re hammering home supply chain, inflation and other talking points internally, then they’re muddling the message that gets delivered externally.
Reframe The Justification For A Price Increase As A Win-Win
Negotiation is about mindset as much as skillset. It shouldn’t be treated as adversarial but rather as a natural and welcome part of the buying process. It’s not about convincing someone to see things your way. It’s about working through any problems or concerns they have—when they want to work them out.
When you view it through this lens, objections during the negotiation process are almost like a gift. The customer is telling you where they’re stuck and where they need more information. It gives you the opportunity to understand their position and also help them clarify their thinking. And understanding their concerns will further strengthen rapport and trust.
This process also allows you to focus on solutions that are based on what they’re dealing with now and how your product impacts that. Ask, clarify and respond — don’t make assumptions.
Be Deliberate In Your Word Choices
In addition to negotiating with customers based on their Behavior Styles, it’s important to remember that word choices matter, particularly in sales. Steven Lozada, one of our Master Facilitators and President of Upward Mindset, discusses this in detail in our podcast episode on How Word Choices Make or Break Sales Conversations. He emphasizes the critical role that communication, preparation and deliberate word choice play in helping a salesperson build connections and elevate trust.
Careful preparation is essential to word choice selection. You are planning for the objections and having your value prop ready. Especially when there’s a long-term relationship with the customer, salespeople may feel like they can wing it and succeed on charisma and personality alone. But these more complex discussions require planning, nuance and strategic attention — what Lozada calls “conversational intelligence.”
Check Your Own Mindset Around The Price Increase
Those inner conversations can derail the process before the salesperson ever picks up the phone. On the other hand, when someone’s beliefs, values and attitudes are aligned, it becomes a powerful force that makes not just price discussions but every interaction with customers easier and more productive for all involved.
Think about it: If you truly believe in the product, the company and the value you’re providing, you’re not going to be so quick to go straight to discounting. If you have confidence in what you’re saying and your ability to understand and meet your customer’s needs, you won’t hesitate to have the conversation and sincerely ask about their feelings, concerns or objections.
Leadership Accountability for a Successful Price Increase Announcement
It’s vital that your leaders model the behaviors and messaging they want to see. This applies to coaching and communicating price increases as well as corporate values. If there are mixed messages coming from the top or across the organization, your salespeople will invariably struggle to have effective conversations with their customers — and your customers will see the disconnect.
Providing justification for a price increase doesn’t have to trigger combative or challenging discussions. Instead, they should be an opportunity to shine a light on the value you’ve been providing your customers, surface any hidden needs or concerns so they can be addressed, and remind them of all that they get from your partnership — and all they’d lose if they made a change. With the right mindset and skillset, your sales team will be able to further strengthen their customer relationships and build long-term loyalty.
Practical Tips for How to Tell Customers About a Price Increase
Mindset. Preparation. Asking great questions. Clearly articulating your value proposition. Showing empathy. These are all hallmarks of what great salespeople do every day. And when it pertains to how to tell customers about a price increase it’s no different. Below are some helpful “Do’s and Don’ts” you can keep in mind to help provide justification for a price increase.
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