Whenever a salesperson asks me about the “best” time to implement a price increase, my quick answer is, “Right now!”
Of course, after I say this, the salesperson wants me to back up my response, which is a good opportunity for me to tell them that whenever they take a rate increase, how they do it matters immensely!
When you take a price increase, you must do it with confidence.
Sadly, some salespeople are not even confident about their current pricing, let alone a higher price. And to compound the matter, the salesperson thinks if they put off taking a price increase, some how the price increase will get easier “down the road” and the customer will respond with fewer objections.
That’s rarely the case.
Sure, you could wait, but ironically what happens is that you begin believing that you can never take the increase (which isn’t realistic at all)!
What happens by waiting is that you just end up losing that much more revenue.
As for when to take an increase, I believe you can do it when any of the following conditions occur:
1. A competitor has gone up in price.
2. You’ve incurred an increase in your costs.
3. Your customers have just raised their prices.
4. Other key players in the industry are increasing their prices.
These four reasons are “market factors,” and a sales force needs to be aware of them and how they impact pricing and revenue.
However, just because you can take a price increase when one or more of the above variables appears doesn’t mean you always should. It merely means the marketplace is giving you permission to do so.
The additional factors you need to consider are what I call “value factors.”
The below questions will help you identify the real reasons why you would want to increase your prices. These are all focused upon your customer’s desired outcomes and how what you offer meets those outcomes.
1. Has your customer experienced added value from using your products and/or services in the past year?
2. Is your customer going to be experiencing added value from what you provide them in the year to come?
3. Are there improvements in service or performance you can document that your customer would see value in?
4. Will you be able to increase your strategic importance to your customer in the year to come?
5. Can you show your customer how what you provide them will give them a competitive advantage or minimize their risk in the year to come?
These are the real reasons why you can take a price increase. When you are able to demonstrate added value to your customer, it is easier to present an increase in price.
Yes, there could very well be other strategic or even tactical reasons why you would not want to take the price increase, even though you could take it. You will be able to discern these reasons only after assessing your overall business plan.
Price increases are a part of the selling industry, as every consumer knows, whether that consumer is in a B2C environment or B2B environment.
My perspective is you should diligently and routinely review your pricing structure to determine when a price increase is wise. If more companies followed this approach, I believe they would take more price increases (and they would be justified in doing so).
Being proactive not only guards your bottom-line, but also provides you some protection should there be unavoidable price increases on the production or operation side of what you offer.
The more confident and comfortable you become in your pricing – including your price increases – the less likely you will be to devote precious energy to worrying about your pricing. That energy is better spent when you show how what you offer meets your customer’s needs and desired benefits.
The pricing structure that is best for your company will always be closely tied to the value you bring your customer.