Five Fall Back Strategies For Price Increases

With the rise in prices in certain industries including those that are impacted by petroleum prices, we have helped a number of companies implement price increases. The common challenge that seems to face each firm is gaining support from the sales force in implementing these price hikes. Quite frankly, we find it easier for customers to accept price increases than we do most sales teams.

We find that sales representatives who must communicate price increases to their customers are fearful of the negative reaction that may occur at the time of the presentation. In most cases, sales reps will want to have personal meetings with their biggest and best customers in order to address questions or issues that may arise.

The key to diffusing the fear among reps is to make sure that each rep is well prepared with strategies and back-up plans going in to the meeting. Don't leave reps to spontaneously respond to resistance. That's a tough challenge even in the best of situations. Instead, create an opening approach to communicating the price increase and have at least two back-up plans in the event that negotiation is necessary. Here are 5 strategies that work and one strategy to avoid.

Eject Strategy
Remove yourself from the negotiation process. Defer any negotiation to management. Tell the buyer that you have no ability to change the price increase without discussion with your management team. This approach gives the sales rep time to return with a well crafted plan, removes the rep from the "hot seat" and helps to preserve the reps relationship with the buyer.

Defer
Defer the price increase to a later date. Emphasize that the increase amount in not negotiable but the increase can be delayed for 30, 60 or 90 days.

Trade Strategy
Offer to trade the increase for additional sales volume. Make sure that the additional sales volume profit dollars are equal or greater than the gain in price increase profit margin.

Reduce
As a next to last resort, reduce the amount of the price increase to a predetermined level for this account. Determine a pricing floor before presentation.

Swap
Swap products to a lower priced product. Understand that this approach may reduce the dollar profit margin even though the percent profit margin may be the same or even higher.

Rescind the Increase
A good option to avoid, if possible.

While these strategies may be useful for many situations there are a number of additional approaches that may work very well for your situation. The key is for sales reps to have a plan that they know they can go to when necessary. In the end, you will likely see better returns on your increase initiatives and reps who will be more comfortable with future price increase initiatives.