Price Increases: Q & A for Sales People

by Dave Kahle

Question:
Customers in my industry do not accept price increases unless they have zero alternatives.  How do we handle this?

Answer:
I’m sure you are not the only person thinking this way, nor is your industry the only one with this issue. Probably almost every one reading this frequently hears  from their customers that their prices are too high, and that the customer won’t accept price increases.

          Now, I’m assuming that the reason you want to increase their price is because your cost has increased.  In order to maintain your margins, you have to increase the sales price to proportionately reflect the increase in your cost.

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But, your customer is vocally objecting.  What do you do?

          First, analyze the business.  If you absorb the price increase and thus decrease your margins, can you live with that?  Is the business still profitable?  Is the account worth the low margins?  If the answer is “Yes, you can live with it”, then absorb the increase, tighten your belt and try to leverage that position into more opportunities within the account.

          Tell the customer you’ll try to maintain the price, but the only way you can do that is to spread your costs over more product.  He’ll need to buy something else from you to help you do that.

          If the answer is “No, it is not worth maintaining the business at low or no margin”, then you need to be brutally frank with the customer.  Tell him you cannot continue to service him at this price.  Indicate that you’ll maintain the price for 30 days, and that on day 31 the price will be increased.  If he would like to purchase the product from... READ THE FULL ARTICLE HERE