Over time, the price you charge your client is inadequate, no longer allowing you to create the value they’ve come to expect from you. All of the inputs you invest in to serve them increase over time, and at some point, you have to raise your prices, just like your client raises their rates. No one is thrilled to pay more, but they must, and you must obtain a price increase. Here is how you raise your price with existing clients when it is necessary.
Do It In Person
In a very transactional business, you might be able to get away with a letter mailed to a purchasing agent to inform them of a price increase. In a more strategic B2B sales relationship, one built on value creation, sending a form letter is inadequate.
You are better off sitting down with your client to tell them that you are increasing their price, giving them as much notice as possible. When you send a form letter or an email, it can provide your client the impression that you are afraid to tell them you are increasing their price, and your unwillingness to tell them is an indication that you are doing something to them—not for them.
The way you ensure you execute for your client is to charge enough money that you can invest in producing the results they need and that you promised.
When your meeting agenda is to discuss a price increase, don’t hedge, or hem and haw, avoiding saying the words “price increase.” Don’t save this news for the end of your meeting, hoping to skate out without having to talk about the price increase. Instead, tell them directly that you are increasing their price and do so with confidence.
The price you pay for anything increases over time. Your client is not oblivious to this reality, and neither are you. In fact, over time, your client increases their prices to their clients or customers. While no one is excited to pay more, over time, they will pay more for much of what they buy, and so will you.
Be direct and confident in the conversation, knowing that it is necessary to continue to serve your client in the way they have become accustomed.
Share Why it is Necessary
Why do you need to increase your prices to continue to serve your clients? Maybe the cost of the inputs you buy to help your client have increased over time, requiring you to pay more. Perhaps, you need an additional investment from your client to meet their needs, needs that have changed over time, and weren’t necessary when you acquired the client.
It is helpful to your cause to describe the price increase as necessary to continue to produce the results your client needs. You might also have to provide a rationale for increasing the price to creating new value for your client when that is true.
Whatever the reasons, you should share the reasons, eliminating the idea that the price increase is about your profitability and not your client’s results.
You have to raise your prices for the same reason anyone has to increase rates, including your client. Share those reasons with your contact, knowing they will have to explain to their team why they are now paying more for your solution.
Explain the Necessity for Continued Execution
A price increase is necessary for a few reasons. The first is your ability to continue to execute for your client. The second is to create new value, something that is still about execution.
Companies that don’t raise their prices while experiencing price increases for all the things they buy don’t do well. Over time, you will see companies lose clients to service failures that were caused by their inability or their unwillingness to increase their prices. Because they lack the money to invest in serving their clients, their service failures become a compelling event that allows their competitor to displace them.
You are increasing your price to ensure you execute for your client, preventing you from losing them because you lack the money to invest in producing the results they’ve come to expect of you and your company. Tell them the price increase ensures execution or creates new value worth paying more to obtain.
Share the Value of the Investment
One of the ways you help your client agree to your price increase is to explain how the increase benefits them, i.e., how you are spending their money.
The increase is an investment in their results. You are paying your suppliers more because their costs have increased over time, and lower-priced providers have proven inadequate. The raw ingredients of what you sell have become more expensive to obtain, and there are no reasonable substitutes. Whatever the reason, you make it easier to sell your higher price—and more comfortable for your client to sell your higher rate—when you share how you are investing the increase in their results.
One of the reasons companies lose their clients is that they don’t raise their prices over time, preventing them from making the investments necessary to execute and deliver the value they promised. Retaining your clients means creating new value over time and that new value comes from the new investments your company makes, as well as the new investments your clients need to make to obtain it.
Selling isn’t something you do to someone. It is something a sales rep does for someone and with someone. Your client is the beneficiary of the value you create long term. A price increase is also for your client’s benefit, as it ensures execution or allows for new value creation.
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Filed under: Sales