There has never been a time in our professional lives where we’ve been in a better environment for raising prices. The winners in an inflationary environment are those who deliver value.
Below are several tips, reminders, and philosophies – courtesy of Casey Brown from Boost Profits - to help you navigate price strategy and help you maximize the margin you get for the great work that you do.
Pricing Philosophies for All to Remember
- If the customer won’t pay you for the value you provide, that is NOT a relationship. It is an abusive relationship. Don’t accept mediocre pay for excellent work. It is unjust and it robs you of the important resources you need to take care of your people, to grow, and to innovate.
- Tiny changes in price equate to massive changes in profitability. What would happen if you became excellent at strategic pricing?
- There is no greater use of your time then on strategic price planning or executing. It will be the most profitable time you spend.
- How regularly do you dedicate time to having strategic pricing conversations within your business? Whatever that amount is, increase it. Give it your time and attention. Sales is king, and has the throne, but pull up a stool for pricing.
What’s going Wrong?
- Price increases are often too little, too late. We don’t move fast enough. Every moment we don’t act on it there is a permanent sacrifice of margin if you don’t ask for it. Be ready!
- Cost increase are someone else’s price increase. It defies logic to be stuck in the middle. Customers do not have all the power. DON’T fall into this trap.
- DON’T rely on your cost increases exclusively as a reason, believe your customers, or price from a position of fear. That only communicates that you add no value!
- DON’T send price increases naked into the world. Dress them up in value clothes. Build context around your increase with the value-added things you have done along the way.
Thoughts about Buyers
- It is in the customer’s best interest to strip you of your value. Please stop confusing what your customers tell you as market intelligence. Your buyer is human. Humans are inherently self-interested. They will share with you what helps them. They won’t tell you the full story.
- 82% of salespeople believe prospects are honest. If you believe what they are telling you, you have already lost the pricing game.
- What really drives buyer decisions? Your product or service being in stock (or available on their timeframe) or in spec (meets their exact need). Not price. The buyer however will communicate that it is about price.
- Sales = Data (did they buy?). Complaints = Noise (everything that they say)
The Psychology of Pricing
- Most pricing decisions are made from a place of fear. We tend to price not to lose instead of pricing to win. Don’t operate from a place of fear.
- There are underlying hidden obstacles sabotaging pricing conversations between salespeople and customers. Research by :
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- 75% of salespeople have need for approval more than the need to close.
- 58% of salespeople are not comfortable talking about money.
- 61% of salespeople find it OK when customer wants to shop around
- 82% of salespeople believe that prospects are honest.
Readying for Pricing Conversations
- Prepare, Pause, and Probe
- Prepare
- Most companies spend zero time practicing how to handle the price objections of their customers and prospects.
- Anyone who spends less than five minutes practicing doesn’t care about the margins.
- Create a price objection FAQ document. Help your people with how to message and handle the objections
- Pause
- When handling objections, don’t be in a hurry. Listen and pause before talking.
- Slow is smooth, smooth is fast.
- During your pause, contemplate that a customer objection for price is a buying signal.
- Probe
- Questions are your superpower in the face of an objection. They are the best answer to an objection.
- Ask an insightful question about your customer’s business to uncover the real concern.
- Prepare
Communicating a Price Increase to Customers
- Be brief and unapologetic. The communication doesn’t require a tome. A couple of sentences will usually do.
- Don’t confuse transparency with partnership, or opacity with duplicity.
- Do the least amount of communication on pricing necessary that is commercially responsible.
- Don’t create price sensitivity where it doesn’t exist. If customers are given a platform to complain about pricing, they will do it!
- Strategically segment your increases. Not everyone gets the same increase. Not everyone gets the same communication.
- One size fits all price increases – and communications – only fit the biggest price bully. That’s selling to the most price sensitive and forgoes where we could extract more margin for our work.