Best Sales Training Advice on How to Increase Your Prices
No customer wants to stomach a price increase. Sadly though, as long as central banks control our currencies, salespeople will need to keep up by increasing prices. It’s simple arithmetic of more currency chasing the same amount of products and services.
Not only are buyers trained to say ‘no’ to price increases, but most buyers also avoid meeting to so much as allow sellers to discuss price increases. Fortunately, yours is a well-trodden path. Our expert sales negotiation trainers have mapped out your journey for you, drawing from various modules taken from our B2B Sales Negotiation Training.
Choosing your Opening Sales Price
Question: If you want a 5% price increase, do you open with 5%?
The short answer is: usually not. This is an important question with various dimensions. Let’s examine some key pointers to assist you in deciding on your number:
Our sales price research has shown that the single best predictor of where we finish up is where we start from. We’ve also observed that most of the time, sales negotiators compromise by settling somewhere in the middle. So, if you start with 5%, and the buyer wants an unchanged price, you’ll likely settle around 2.5%. Be careful if the buyer retorts by asking for a discount. Using this old tactic, the buyer seeks to offset your price increase with their request for a discount, leaving price unchanged. So if you open with a 5% increase, and the buyer opens with demanding a 5% discount, you’ll likely finish up agreeing to little to no change in price.
Round numbers such as 5% or 10% invite a harder pushback than, say, 6% or 9%. 6% and 9% appear at an unconscious level to have some calculated and logical underpinning, and so will encounter less resistance.
What opening position is appropriate in your customer’s culture? If you’re negotiating with a country different from your own and the other country is characterized by opening more ambitiously (e.g. Vietnam, China, India, Turkey, Mexico), then you have two choices:
- Ask your customer whose culture you’ll negotiate in. If your customer agrees to use your culture’s norms, then if they open too ambitiously, you can remind them of your agreement, and dissipate a potentially tense situation by sharing a laugh about it.`
- Factor in your customer’s ambitious opening position by starting more ambitiously yourself. This gives you room to retreat within your position as you move towards your planned middle-ground.
If you’ve worked with your customer for any length of time, you’ll be able to predict whether they will expect to negotiate your prices downwards. So look to your customer’s past behavior when predicting their opening position and their response to your opening position.
It’s dangerous to open with a sales price increase that you can’t justify. Ensure that you can substantiate your price with metrics if required.
Be careful not to make the mistake of opening with a price that is ‘reasonable.’ It just takes one unreasonable buyer to teach you why this is an expensive mistake.
Be careful to anchor and continually re-anchor your position. Also, ensure that you’re throwing out your customer’s counter anchors.
Continue emphasizing your position while politely and diplomatically declining or even for a time ignoring the customer’s position. The more you talk about the customer’s position, the deeper sinks their anchor.
Be confident as you return the conversation back to your imminent and unstoppable price increase. Examine the examples below in the “Toughest Common Buyer Objections and Responses” section on how to achieve this.
Sales Training to Validate Your Customer
In the hot pursuit of a price increase, too many trained sales professionals forget about how their approach impacts the customer’s emotions, pride, self-esteem, self-image and status. Let’s say you enjoy the enviable position of being able to force a price increase on your customer. If the customer feels like you took advantage of them, they will seek retribution when the tables turn. The customer will also seek to reclaim their dignity throughout the course of your contract. This usually results in your margins taking a hit, as the customer sticks to the letter of your contract, but not the intent.
It’s worth remembering how the customer feels when they are denied the opportunity to negotiate effectively. They’re likely to feel lousy about their skills, and also look bad to their manager and colleagues. Going in with a bigger ask allows you to validate or ‘give face’ to your customer. When you execute a well-planned retreat within your ambitious opening position, you allow the customer some glory by claiming your retreat as their victory. Never forget that you’re negotiating with people first and companies second.
Can your customer switch to your competitor or replace you in some other way? Your relative power and advantage over your customer will depend upon who enjoys the better actionable ‘Best Alternative (BATNA).’
The negotiation graveyard is littered with stories of sales professionals who underestimated their customer’s best alternative or overestimated their own best alternative. There’s no finer time to review both companies’ best alternatives than when you need to get a price increase over the line.
Your analysis should include answering the following switching vendor questions:
- Who would my customer switch to, and has my customer been talking with this competitor?
- What are my customer’s barriers to switching?
- How long would it take to switch?
- What are the risks of switching, and who in your customer’s organization is most affected?
- How do my customer’s decision-makers feel about switching?
- How can I influence my customer’s decision-makers against switching?
When to Fear their BATNA
The best sales training courses will teach you that the worst time to ask for a price increase is when your customer is unhappy with your company’s performance.
If any of your departments have underdelivered, consider delaying your price increase while you remedy the situation. If your customer is happy with your overall performance, then your chances of being replaced due to a price increase are dramatically smaller.
Few trained salespeople want to be the first to announce that their prices are being raised. Announcing your price increases is easier if your competitors have already announced their increases first. Ensure that you keep your feelers out to be aware the day your competitors announce their price increase.
Why Are You Increasing Your Sales Prices?
Your customer is virtually guaranteed to ask you ‘why?’ On our sales training NYC workshops, we teach how to reframe to avoid falling into the trap of defending yourself. See the section below entitled ‘Reframing Objection.’
If you indulge the buyer in too much detail, you could end up wasting a great deal of time, getting you no closer to gaining an agreement. You could also risk disclosing sensitive commercial information. Buyers often push sellers to substantiate with more details as a delay tactic, or in the hope that the seller will get tired and give up, or to ask those intrusive questions they previously didn’t dare ask.
Here are the more popular reasons our clients use to underpin their sales price increases, together with the most important consideration for each:
“It’s the start of our new financial year.”
Caution: Ensure that your price list is showing consistency in your sales price increases or that you can explain differences in price increases.
“We haven’t increased our prices to you for X years now.”
Caution: While this is too often true and may seem compelling at first glance, a savvy buyer can turn this around to ask why you expect them to stomach a multi-year increase in one dose. The buyer may also turn the conversation around by demanding that you demonstrate how your prices are lower than your competitors or that you’ve demonstrated value-add.
“We need to keep up with inflation.”
Caution: Be VERY careful which inflation figures you use. In the US, the government has changed the calculation so dramatically since 1980 that their official CPI-U is virtually meaningless.
Shadow Government Statistics offer a handy set of data using the 1980 formula. Also, be clear on whether you’re catching up for last year’s inflation or factoring in this year’s inflation.
“Our costs have gone up.”
Caution: Ensure that your input costs support your price increases for the products or services that you supply your customer with. Also, bear in mind that this door can swing in both directions.
Be prepared to lower your prices should costs decrease in the future. This is especially true for sectors characterized by cost savings, such as high-tech.
“The industry’s trend shows a cost increase.”
If your marketing department or an external service has tracked your industry or competitor’s pricing, then you’re in luck. This is most often used reactively to play catch-up with your competitor’s increases.
Caution: Be prepared to argue why an industry figure should affect the products you supply your customer by the same rate.
“Your order size has decreased” or “You didn’t order the volume you forecasted.”
Caution: Although highly unlikely to happen in practice, be prepared to walk back your price increase if your customer hands you an order to make up their shortfall. Most of our sales negotiation course participants admit to having no mechanism at the start of a new customer relationship to safeguard themselves against this situation occurring.
While you’re highly unlikely to get compensated for last year’s unfulfilled forecast, your price increase can balance the scales for this year. The ideal is installing a sliding pricing scale, comprising a rebate to incentivize your customer to uplift the volume in their forecast.
“We have/will be providing improvements in value.”
Caution: Ensure that you provide calculations of the value you’re providing to your customer in their own terms. We have seen too many clients make the mistake of talking about value from their own perspectives, such as additional services provided or improvements in products and services.
It’s necessary to step into the customer’s shoes to figure out what your improvements will translate to for each decision-maker. This process takes time and having trusting relationships to get honest answers to well-honed questions. Book meetings with your customer’s decision-makers before your price increase announcements. The ideal is to have a direct link between your value improvements and your customer’s decision-makers’ KPIs (key performance indicators).
- “It’s the start of our new financial year.”
Ensure that your managers and leadership are briefed and onside prior to getting the wheels on your price increase initiative rolling. Too often, the buyer will escalate to their manager or several levels above their pay grade, which will result in their senior leaders picking up the phone or shooting an email to one of your senior leaders. While these emails and calls about price increases are sometimes diplomatically worded, they’re more often threatening in tone, and can be heated.
You want to avoid your leaders panicking into capitulating in order to avoid conflict. This is the second most prevalent reason price increases fail – the first being a miscalculation of your own and your customer’s BATNA. Your leaders don’t necessarily possess your level of customer intelligence, detailed preparation, sales negotiation experience, or sales training skills.
If you’re able to meet with your leaders before putting in a sales pricing increase, stress to your leaders how imperative it is that any escalation is delegated back down to you. If your leaders insist on negotiating, ask that you lead negotiations and that they support you.
If your leaders insist on leading negotiations, ask that you be present to support. The worst outcome is if they insist on going into negotiations without their team. Ensure you book sufficient time in their calendar to brief them fully.
The predictable lesson the customer’s organization learns from their escalation and your leader taking over and likely compromises which ensue is to follow this proven formula next time they’re unhappy with your excellent negotiation performance.
What’s Better Than a Price Increase?
Rather than getting mired in endless back and forth emails justifying your price, negotiators trained in win-win collaboration often choose instead to redirect the conversation towards alternatives their customers find more attractive. A price increase can provide a strong motivation to explore creative alternatives.
While a price increase can be used as a tactic to win greater engagement from the customer in order to explore more value-adding options, we train our sales negotiators to habitually ask the right people the right questions to find better ways to cement their relationships with their customers. In addition, sales training should equip negotiators to increase their revenue and margins at all stages of negotiation—not just when negotiating sales price increases. We’ll next briefly explore how to increase your margins and profits through revenue and cost discussions.
Would you be prepared to either offset or reduce your sales price increase if your customer offered you:
- An increase in volume or a market share increase?
- New additional business?
If your customer could support you in reducing your cost of servicing them, how would this affect your price increases?
- Logistics savings
- Reducing your insurance costs, warranty claims or period of coverage, or other guarantees
- Reducing or paying for consignment stock
- Reducing some other aspect of your service offering
- Your engineers collaborating together in a BPM (business process reengineering) initiative
One of two things usually happens from your customer engagement in a mutual exploration of alternatives to a price increase:
- Your customer is able to agree to either increase your revenue or decrease your costs, resulting in your price increase no longer being necessary or in a reduction in your price increase.
- Your customer isn’t able or isn’t prepared to agree with any method of offsetting your price increase. However, your customer realizes, to a far greater extent, how much they need you, and your customer appreciates the value you provide to them.
Your customer will feel engaged by the process and therefore will be less likely to feel victimized. As a result, your customer is far more likely to accept your price increase.
Excellence Locked in Silos
Does one of your colleagues have that nugget of wisdom you need to get your price increase over the line? A common theme we notice in our classroom and sim sales training is of excellence being locked in the minds of each negotiator or negotiating team. The bigger the team and the more spread out the team members are, the greater the likelihood of a silo pitfall. While our courses build relationships that endure long after graduation, this should be no more than the start of the knowledge exchange. Leaders need to plan knowledge management.
The most practical way to get knowledge management working for your team is to build it into your existing processes. So, if your team regularly has calls or meetings, schedule at least a few minutes for the sharing of at least one or two stories. Ensure that the focus of your conversation remains on sharing lessons rather than on the size and probability of closing the deal.
Have you fully explored avenues for a leveraged trade? The ideal is to find something to trade that is of low to no cost to your company that your customer places a high value on. This describes a ‘high-low’ trade and gives you greater leverage.
Before attending our sales negotiation classes, we see too many clients giving away leverage trades because they didn’t figure out the true value of their value proposition to their customers. To identify how to best leverage your value proposition for each customer, follow these two steps:
- What does each decision-maker in your customer’s organization value most about working with you?
If this is the first time you’ve performed this exercise, be prepared to be surprised by the discrepancies you uncover. These points of difference are gold dust when you leverage them effectively. This exercise is best performed with the aid of a SWOT analysis (strengths weaknesses opportunities threats).
- Are your customer’s decision-makers able to continue enjoying these benefits if they were to switch away from you to their BATNA?
Here are a few examples of areas of your sales value proposition that may be of low to no cost to you but could be of high value to some of your customer’s decision-makers (for more context, see the below table).
The following could be offered in exchange for a leveraged trade, which may include your price increase:
- Free reports
- Consultancy or other services
- BPR improvements
- Faster delivery
- Increased warranty period
- Increased payment period
Be sure to understand the yardstick by which each of your customer’s stakeholders measures you. For example, a production line shutdown may be viewed very differently.
Sales: unhappy customers and lost orders, resulting in missed targets, resulting in lost bonus payments.
Operations: reduced productivity figures, rescheduling of production lines, working late to repair the production line.
Workers: after hours and weekend working to make up for lost production time. This can be a positive if they want to earn a higher rate, or a negative if they would prefer to spend their weekends with family and friends.
Finance: lower asset utilization, higher after-hours rate paid to workers.
Public Relations: damaged reputation from unmet customer promises and reduced recognition for productivity rates.
Buyer: defending their decision to persuade their colleagues to switch to a lower-cost provider, or a lower service level offering.
The astute salesperson will notice the wide array of motivations across the customer’s organization. Using the above example: in order to effectively sell in the price increase for your higher quality product or premium repair service, you would typically do well to talk with the buyer last. Invest your time understanding the risk/value of your product or service to each stakeholder in your customer’s organization.
Off the Table
What if you’re already delivering the premium value that your customer’s decision-makers expect, and you have nothing more to offer? No problem; it’s now time to invite your customer to sweep some areas of your service, quality, or another dimension they value off of the negotiation table, in order to reduce your price increase.
Why would you want to remove a facet of your service that your customer’s decision-makers love? Remember, we’re still talking about leverage, and when you ask to remove something your customer values, one of two things will happen:
- Your customer agrees to your reducing or removing your product/service offering, resulting in you making a cost-saving, which you can choose to apply to offset the full extent of their impending price increase.
- Your customer flinches, complaining that they aren’t prepared to be without the areas of product/service offering you’re discussing; these services might be the very reasons they chose you as their vendor. You now have the leverage to keep the full extent of your price increase, since your customer has chosen to continue enjoying the full extent of your product/service offerings. Write their words down and summarize or quote their words back to them when they push back on your price increase.
Often, our sales training graduates ask us which areas of value they should choose to put on the table. Table for discussion those areas that your customer (not necessarily the buyer) values most.
Low Value to Customer
High Value to Customer
Low Cost to You
Ignore or bundle. Ensure the value really is low to all your customer’s decision-makers.
Leverage. Quantify the value and risk to each of your customer’s decision-makers.
High Cost to You
Discontinue. Offset with something of higher value to your customer.
Reduce by opening low and anchor and/or bundle.
There are methods to subtly take control and the sequence or order in which you discuss your mutual goals. This includes your agenda and bundling of offers. We’ll save these best practices for our negotiation sales training classes, where we rely upon our world-first Negotiation Simulation to make these choices clear and provide invaluable, no risk of losses practice.
Most business people are aware that we’re more likely to be moved into action to avoid risk than to achieve a goal. Put differently, most companies buy to avoid pain or reduce risk than to achieve a lofty new vision. This nugget of sales negotiation wisdom was gifted to us by cognitive psychology’s “prospect theory.” Yet, too many salespeople still focus on the silver lining when they could be closing more sales deals at a faster rate with less stress by talking about the gray cloud.
So check your messaging to ensure you are not ignoring the risks to your customer if they don’t continue working with you, or if they don’t continue buying your premium products or services. We decide to buy based on our emotions, then we backwards rationalize our decision by using reason. In NLP these directions are called ‘towards’ and ‘away from’. We venture more deeply into brain science and unpack further practical lessons on our sales negotiation seminars.
Goal Frame: “By choosing our premium service, we’ll respond to calls within minutes. Our premium service means your production lines should remain up 99% of the time. This maximizes your productivity and ability to deliver on sales orders.”
After hearing this, the buyer’s blood pressure, heart rate and brain chemicals (neurotransmitters and neuromodulators) are unlikely to have been shifted. So the buyer is unlikely to feel motivated to act.
Loss Frame: “If you don’t use our premium service and your production lines go down, we may only respond within hours, rather than minutes. If your production line drops from the current 99.5% level to 95%, your colleague in production calculated that this would cost your business $X million over the course of a year.”
After hearing this, the buyer’s blood pressure and heart rate will be elevated. Their brain chemicals (neurotransmitters and neuromodulators) will likely have shifted. You’re now far more likely to be able to shift the buyer into action – a highly desirable state.
The RFx Threat
Most of the time when a buyer threatens to put your business out to tender, they’re bluffing. The main reasons a buyer’s bark is usually worse than their bite include:
- The buyer lacks internal buy-in to switch (see the section on BATNA). Most buyers on our Procurement Negotiation Training courses complain that their internal negotiations are every bit as challenging as their external vendor facing negotiations. Buyers often walk a tightrope with their internal customers but put on a brave face that they’re speaking for their organization.
- The customer either is not prepared to switch or is unable to switch.
- The customer lacks the resources to qualify another supplier.
The salesperson wants to take a calculated risk assessment of the probability of their price increase causing their business to go out to tender, and also the likelihood of losing the business to a competitor.
The RFx Reality
If the buyer is able to follow through with their RFx threat, it’s worth bearing in mind that, for the above reasons and more, the incumbent supplier almost always enjoys a distinct advantage of winning RFxs. The sales professional’s antidote to the buyer’s RFx threat is to do the necessary legwork detailed in the ‘High-Low Leverage’ section.
If your price increase causes your business to go out to a competitive tender, be gracious by offering to assist your customer in crafting their RFx. You will naturally ensure that your customer’s RFx meets their most important needs and that your value proposition is well matched to your questions in their RFx.
Key RFx Considerations
Your Leverage in Not Participating
If you have calculated that the customer is highly unlikely to switch to a competitor, consider getting senior-level approval to not participate in their RFx. You still want to support your customer by crafting their RFx for them. If, despite your choice to not participate in your customer’s RFx, your customer continues negotiating with you, your price increase is virtually assured.
Another reason to not participate in the RFx is if you have calculated that your customer would require your support and collaboration as they transition or switch to your competitor. Your customer may need you to save them from incurring prohibitive costs, high business risks, or even catastrophe. Too many sellers facilitate their being phased out by accepting reduced order sizes from their customer. There can be enormous power in simply letting your customer know that you’re prepared to walk away.
Occupy the Moral High Ground
No matter how aggressive or competitive the customer becomes towards you, maintain the moral high ground by remaining professional and calm. You want to reduce the chances of your customer feeling animosity towards you or your company. Remaining on good terms maximizes the probability that your customer will come running back into your open arms when things don’t work out as planned with your competitor.
Is It Simply Your Time?
The business world is rife with stories of customers who were forced to realize their mistake in switching suppliers. In a few industries, it’s common practice to switch suppliers regularly in order to teach each supplier a lesson. If your customer has earned the reputation of switching suppliers, then you can comfort yourself in the knowledge that although it hurts to lose your customer’s business on your watch, in time your customer will be back. If your customer has decided that it’s time to switch suppliers, then the only way you can keep their account is by buying their business. This usually comes down to whether your leadership is willing to erode long term margins to keep the shorter term revenue.
Too many participants on our Sales Training courses confess that their companies issue price increase notices a mere few weeks prior to the prices going into effect. You don’t want to give the buyer any reasonable justification to delay your price increase going into effect; instead, follow these guidelines:
- Give as much notice as possible. Regular emails are necessary.
- Send letters, too, since unwelcome or low-priority emails are too often ignored.
- Ensure you don’t just contact the buyer; also include other decision-makers in your customer’s organization. Negotiators in our sales training seminars share how often the buyer has chosen to simply ignore their emails and then claim they weren’t given sufficient notice.
Read your contract’s small print. Ensure that you use the addresses and names in your contract, in addition to contacting the people you feel should know.
Toughest Common Buyer Objections & Responses
Since buyers typically avoid meeting with sellers to agree on a price increase, you may end up negotiating with your buyer via email or a phone call. Conversely, the buyer’s account may be too small for your business to warrant a meeting, and you may choose to negotiate via email or a call.
If you’re unable or unwilling to meet with the buyer, below we’ve included the most commonly encountered tough buyer objections with some responses that work to counter tough buyers:
Please consider whether the style of these responses is compatible with your chosen negotiation style for your account, relationship, and product or service.
We would also recommend incorporating conversational reframes from our Sales Negotiation Training to take and keep control of the conversation. The text in brackets (i.e. “<XXX>”) is either optional or requires that you insert your customer’s company name or the date.
Buyer: “We reject your price increase.”
Seller: “We are increasing our prices <to all of our customers> from <Date>.”
If the buyer continues to repeat their rejection, then repeat your statement followed by “Where do we go from here?” By forcing the buyer to talk, you place the buyer under pressure.
If the buyer doesn’t accept your price increase or agree to meet with you, then your conversation will likely then escalate into one of the following:
Buyer: “We will de-list you / not invite you to our next RFx / open your product up to competitors if you persist with your sales price increase.”
Seller: “Of course we would like to continue serving <customer’s company name>.”
It’s worth acknowledging the buyer’s threat; if you don’t, they will likely repeat themselves. Be careful not to counter-threaten the buyer, or you risk provoking them into teaching you a lesson in spite of hurting their business interests.
After the above response, continue with:
Seller: Our <see the 7-point list in the ‘Why’ section to choose your reason> means that we have no alternative than to increase our prices from <Date>.”
Buyer: “Are you threatening to stop supplying us?”
Seller: “It’s not a question of us stopping supply. We need to agree on prices with our customers, which is why I’m giving you sufficient notice of our prices increasing from <Date>.”
Buyer: “From our research, direct material and service inputs for your product have been coming down, so your prices should be coming down, not going up.”
Seller: “I welcome reviewing your data on our input costs. I can assure you that our input costs have gone up since our last price increase. Since then, we have absorbed a number of input cost increases, and we are no longer able to continue at these prices. We are increasing our prices from <Date>.”
Buyer: “Your competitors are offering us lower prices.”
Seller: “I would be glad to discuss and compare each of our competitors’ offerings and explore why, from their price sheets, they appear to be a lower upfront cost provider. We are increasing our prices to all of our customers from <Date>.”
Buyer: “I can’t move up my selling price to recover my margin loss.”
Seller: “We have no control over any of our customers’ retail prices, and we must increase our prices from <Date>.”
Buyer: “I can’t do anything now / in this budgetary period. Come back in X months and we will discuss your sales price again.”
Seller: “If we could wait any longer than we already have, we would. I need to inform you that our prices are increasing from <Date>.”
Buyer: “Your delivery / quality / performance / invoicing etc. has been causing us problems, and we can’t discuss a price increase until you have resolved this issue.”
Seller: “Of course, you have my commitment to do everything possible to rectify the situation. Let’s schedule a meeting. Coming back to the reason for this call / email, our prices are increasing from <Date>.”
Buyer: “What have you done to reduce costs?”
Seller: “We are consistently reviewing our cost base in terms of suppliers, materials, production methods, and logistics. We also have a deep commitment to the principles of Lean Manufacturing / Six Sigma, which focuses on eliminating waste and non-value-added costs throughout the value chain.
These initiatives have delivered consistent improvements in productivity over the years. I welcome our meeting to discuss how our engineers can collaborate more closely to uncover mutual cost optimization opportunities. I need to inform you that our prices are increasing from <Date>.”
Buyer: “The exchange rate has gone in your favor for your input costs / sales price, so why are we still getting an increase?”
Seller: “We have never tied our cost prices directly to exchange rates. We have absorbed a number of exchange rate fluctuations over the last <X> years.
Exchange rates are only one of the elements affecting our costs. We are increasing our prices from <Date>.”
Buyer: “Should your costs decrease, will we get a lower sales price?”
Seller: “We are committed to remaining competitive in the market, and do have cost-saving initiatives. I welcome our meeting to discuss how our engineers can collaborate more closely to uncover mutual cost optimization opportunities.
Should we achieve a measurable cost-saving, we can most certainly talk about pricing. We are increasing our prices from <Date>.”
Buyer: “I may have to pull your upcoming promotional activity.”
Seller: “It’s, of course, your prerogative as to which vendor you choose to partner with on a promotion / invite to participate in your new RFx. If this were to happen, then it would be with regret that we would also need to redeploy our promotional spend/sales resources.
I would like to reaffirm our commitment to continue serving <customer’s company name>. We are increasing our prices from <Date>.”
When being threatened, be careful to avoid initiating a conflict spiral. Our sales negotiation trainers caution our clients to remain diplomatic, even in the face of threats and heated emotions. Buyers from retail and manufacturing typically make many more threats than they are willing or able to carry out.
Buyer: “We need more information about your cost breakdown.”
Seller: “The main reason is <see the 7-point list in the ‘Why’ section>. Should you wish to discuss this in more detail, please let me know when suits you best. We are increasing our prices from <Date>.”
Buyer: “I have to deliver an X% saving to the business this year. How do you think your price increase will make me look?”
Seller: “I understand that you have challenging targets. We both do. I’m sorry that our price increase will cause you a challenge.
If I could make this price increase go away or reduce it, I would do this for you. We need to increase our prices from <Date>.”
Buyer: “X% sales price increase is simply too much. We’re willing to discuss X/3%.”
Seller: “Thank you for your understanding that we must increase our prices. I wish that we could increase by only X/3%. We must increase our prices by the amounts shown my attachment from <Date>.”
- Buyer: “We reject your price increase.”
Buyers too often end up controlling the meeting through the skilful use of objections. A popular technique taught in our classes to take back control and steer the direction of the conversation is the reframe. While there are many reframes to choose from, we’re going to very briefly share three. Let’s illustrate via a practical example. The buyer responds with: “That’s too much.” So you respond with:
Zoom in: “Too much compared with who?”
With the ‘zoom in’ you’re following the buyer down the path they have invited you to journey on. Starting with a zoom-in response has two benefits: you validate the buyer, so they feel listened to and understood. You should also get to find out what, if anything, has informed the buyer in coming up with their objection.
Zoom out: “Our product / service is a critical material for your company’s success in your market. Your colleagues have told us that we need to continue providing your company with the same high-quality level of product / service.”
With the ‘zoom out’ you’re reminding the buyer of the bigger picture. To use an analogy: the buyer is wanting to talk about the trees, and you’re changing the subject to the forest. A skilled sales professional should be familiar with the value of their product to the customer’s organization, and in particular to the customer’s key stakeholders.
Pan: “If you were to take care of the delivery or reduced the warranty, then we could forget about the price increase.”
In this example we’re inviting the buyer to remove some part of the agreement. Most of the time the buyer will push back, demanding that the rest of the contract not be changed. Your goal in this example is to tie-in some area of value that the customer perceives that your product / service delivers to the price that they must pay. Returning to the above analogy, we’re pointing the buyer to a different tree in the forest, so away from price and towards delivery costs or warranty period. Here the seller is effectively changing the topic.
Once you’ve understood the buyer’s objections, if you haven’t learned anything new that can help you or change your course, then it usually stands to your advantage to take back control and steer the conversation through a well-prepared zoom out or pan. Most of the time you can anticipate a buyer’s main objections. Save yourself from having to think on your feet in the meeting (and likely not performing at your best) by writing it down their objections together with your zoom in, zoom out and pan for each.
Don’t Blink, Collaborate
In a price deadlock, the negotiator who blinks first usually loses. Under no circumstances should you agree to reconsider your position by “going away and looking at it.”
Notice that we have used ‘we’ and other inclusive collaborative words rather than ‘you’ or ‘I’ throughout our examples. Terms like ‘you’ and ‘I’ tend to be more competitive, while ‘we’ implies collaboration.
For example, “I will have to stop supplying you” sounds more confrontational than “We will have to stop supplying.”
Sales training teaches you to know that it usually pays to steer negotiations away from competition towards collaboration. Get as many of your customer’s decision-makers on your side. Often the customer’s buyer will order an organization moratorium on anyone in their organization discussing pricing or commercial terms with your company. It’s at these times that you want to have established relationships with decision-makers who are hard for the buyer to muzzle, or to make the buyer’s lockdown too late since you’ve already gathered your key information.
Negotiate with Your Leadership
An imminent price increase has the effect of pulling forward customer demand. If you’re increasing prices to all or most of your customers, then your revenue for this quarter/year will be lopsided when compared with next quarter/year. As a salesperson with targets to hit, you may wish to invest some time projecting how customers putting through larger orders immediately prior to your price increase will affect your ability to meet your goals next quarter or year.
The other side of this coin may entail your already being on track with meeting your targets for this quarter/year. If you are on track, this would mean that the imminent big orders may serve your business but not you. You would do well to negotiate with your managers to ensure that successfully negotiating a sales price increase with buyers isn’t detrimental to your ability to achieve your targets.
If you’re a Sales Manager, then ensure you give enough thought to your sales team. Your sales professionals are trusted with taking heat from buyers to push through price increases.
You need your sales team to feel motivated, resulting in more sales price increases and at higher levels. Keeping your team motivated may demand you going to bat for your team by lobbying leadership on their behalf.
Are You Confident?
You can gage your confidence by answering two simple questions:
- Do you feel confident that your product or service warrants a price increase?
- Do you feel confident of achieving your price increase?
If you answered ‘No’ to either of these questions, then the advice in this post will not convert to high rates of success. There is, however, only one remedy to answering ‘no’ to the first question, and this remedy starts with being brave enough to update your resume. Life is too short to be selling something you don’t believe in. Once we start to chase our passion and not our pension, our pension takes care of itself.
For the second question, feeling confident in achieving your price increase comes from knowing that you’ve done the best job possible to prepare and you have the skills necessary to get your price increase agreement over the line. When you implement the advice in this definitive guide to price increases, you’ll have traveled most of the way to preparing effectively.
Sales Training Budget?
If you have a budget for our intensive Sales Training, then we would be glad to guide you or your team to implement not only the advice from this article, with lots of practical role-play exercises including the expert feedback necessary to build empowering habits. On our sales seminars, we’re also able to share many more tools and practical pointers to further stack the cards in your favor. Our Sales Negotiation Training affords you the opportunity to try new practices, make mistakes, and rapidly assimilate more knowledge and skills than you thought possible. We customize training to suit each client’s unique needs, and also offer a few open enrollment classroom seminars.
Perhaps best of all, you’ll not be risking a single cent from any customer account. You’ll graduate equipped with our trading plan, objection reframes, ability to switch between competitive and collaborative styles and the confidence in knowing you have digested the skills necessary to do your job to the best of your abilities.
No Sales Training Budget?
If you don’t have budget for one of our courses, then ask a veteran sales colleague or coach to work with you. Practice role-playing with your coach or colleague. There can be no substitute for the combination of practice and feedback. Why do we recommend that you focus on role-play exercises? Our sales training courses have proven that most sales skills are built when engaging in challenging real-life commercial role-play exercises. This is how you get ‘match-fit.’
The One Minute Sales Manager Movie
There’s a useful confidence-boosting short exercise that comes from NLP (neuro-linguistic programming), detailed in the popular book ‘The One Minute Sales Person.’ You’ll need to be somewhere you can safely relax and visualize. Start by imagining how you feel after having successfully achieved your sales price increase, perhaps seeing yourself hearing words of praise from your manager and seeing your bonus.
Ensure that you remain associated—so when you imagine, ensure that you’re seeing through your own eyes. Then rewind one scene at a time, perhaps seeing your customer agreeing in a meeting or hearing your customer agreeing over the phone, or reading their acceptance email. Make your mini-movie as real as possible. Then continue one scene at a time, working your way back until you reach your next successful action you will be taking. It’s best to run this internal movie over in your mind often. It’s especially important to run this movie before making contact with your customer. We can sense each other’s confidence and fear. Feel confident, and enjoy outstanding sales and career successes.