Do you know the success rate of your last few price increases? Odds are it is in the low 30-40% range like most B2B companies. That’s a lot of profit being left on the table. If you could double or triple your success rate, you could deliver big for your business.
But is doubling or tripling your success rate even a viable goal?
Sales is quick to point out that they operate in a highly competitive marketplace and believe significant volume will be lost if price increases are forced on all customers. This doesn’t have to be the case. With the right approach and enhanced skills, you can double your success rate. The odds are in your favor; follow the best practices introduced below and you are likely to dramatically improve your price increase success rate.
A Sales team with confidence and conviction is the foundation for implementing a highly successful price increase: confidence that the price increase is a fair and reasonable increase and conviction that they can and will achieve a high success rate. This confidence and conviction arises from three things:
- Setting a Fair Price: Price increase targets must be set based on fair and reasonable factors, taking into account your business situation, as well as the market and competitive dynamics. The rationale must be clearly communicated to the Sales team and customers to build the perception of fairness.
- Supportive Leadership: Top Sales and Business leaders must set high expectations on the price increase success rate and be willing to risk some volume loss. Higher volume does not guarantee higher value. Confidence and conviction must start at the top.
- Solid Price Implementation Skills: The business must have the skills to effectively communicate the price increase in a way that influences the market. The Sales force must have the skills to know when to hold firm, negotiate a discount, or walk away and how to manage aggressive competitors. They must understand how their behaviors positively or negatively influence the overall market pricing.
Many businesses set their annual price increase targets based on the financial gap in their profit objectives or based on the historical percent they increase each year. Neither approach inspires confidence in the Sales team.
Furthermore, Sales is often tasked with communicating the increase to their customers will little, if any, support. Setting the right price increase targets—ones that inspire the Sales force and potentially influences the market price—is best done using a formal project approach. A project approach that (1) gathers and analyzes the right internal data and external dynamics, (2) understands the Sales team’s challenges, (3) makes recommendations aimed at both getting your fair price increase and influencing the market, and (4) does all this in a way that builds proactive support from the leadership.
Sound tough? It doesn’t have to be.
Want to learn how to double or triple your price increase success rate using a simple and practical 5-step best practice project approach? Join Joanne at the Vendavo Summit April 4 – 6 where she will share best practices for leading price improvement projects, as well as a special session on “Doubling Your Price Increase Success Rate.” Register here.