This week we decided to step away from trade fairs and focus on another aspect of sales – namely price increase and how it can affect your company’s success and performance in the short term. In this economy, pricing strategies need to be highly competitive, but inflation and rising cost for the materials and labour are unavoidable. Price hikes occur every once in a while and have the hardest effect on current clients in your roster. We have seen companies lose customers and sales, because they haven’t planned appropriately as to how to lead their customers through this transition. This is why we have decided to give you a few key pieces of advice to smoothen out any problem well before they hurt your revenue and market share.
Everyone involved in business knows that price hikes are a natural part – everyone is trying make profit. Quality products and expertise cost money and their value increase as the market moves on. You should announce any price hikes to your customer base and then break down why the prices are growing. This establishes clear communication – not to mention that you show how much you care about your customers – and then shows you where the money is going. This is an excellent opportunity to showcase the value that you bring to the table and why they should remain with you and only you.
No one wants to learn about a price increase in the invoice. You need a few months in advance to give ample time for your customers to adjust their budgets. This way they perhaps could buy the higher tier service you use to get more value this way. It all depends on how dramatic pricing will rise. Although risky as you can obviously face a drop in sales as customers migrate, you’re making a gesture in good faith and of genuine interest for your customers – admirable qualities to search in any seller.
The best way to deal with backlash and complaints is to anticipate them and neutralize before any one of your customers has a chance to raise their voice. On one hand, this means having a trained customer support unit that can handle any ire and dispense with explanations. Ideally, for the most vocal customers, you should have created small extra perks to along with what you generally offer to assure them that they’re getting their money’s worth. Of course, this perk should be calculated to be cost-effective and not cancel out the price increase in any way. On the other, it’s about not having anyone complain at all. This you achieve when you…
You have to know when the moment is right to increase prices. There are two possible scenarios here – survival and expansion. Survival is when you have noticed that the cost of manufacture has risen or that other competitors in your sector have implemented price hikes. In order to stay in the green, you need to follow with your own price increase. You can’t have backlash or customer loss, because everyone else is doing it. Expansion has more to do with your growth as a company. Here you have done your job splendidly and maintain a high customer satisfaction rate overall. Prove your worth to your clients in the months immediately before going through with a price increase.
Pricing is hard to get right and you might be tempted to raise prices at odd times, whenever you feel the need to break even or become in the green. However, we advise you to be aware of which industry you’re in and how contracts work. In case you sign one-year contract with customers, it’s the wrong move to muscle in higher prices, when you have agreed on a lower price. The right way to do this is to announce higher prices close to contract’s end and then negotiate the increase. For service industries, once per year is a good frequency to achieve this without causing a ruckus.
One final message – some customers are always price sensitive no matter what you do to satisfy their needs, while maintaining profitability, so be prepared to lose some sales numbers, but be sure that the overall increase in revenue from the price hike will cover those.