When to Increase Prices?

Convincing the sales team that the increase in the price of the product is necessary, and that they are able to convey the message to customers correctly, is essential when it comes to increasing prices when production costs rise.

Friday, November 22, 2019

Ariel Banos, specialist in price management and founder of Fijaciondeprecios.com, explains five strategies to increase product prices successfully, maintaining profitability and ensuring the viability of the company in the face of rising costs.

Detail of the five strategies:

1. Internal conviction: If we are not fully convinced, we will not be able to convince anyone. We must be convinced that price adjustment is necessary, not an option. The goal is not to make more money, but to preserve our profitability despite changes in costs. Communicate this message clearly to your entire sales team.

2. Focus on our differential: Knowing the position we have within the client is vital to understanding our negotiating power. Here it is convenient to review three key aspects that condition our negotiating capacity:
Impact of our product/service on the client's cost structure
The differentials of our proposal
Feasibility of replacement and current options in the market

3. External Conviction: All communication to the customer must focus on convincing them that continuity of supply, with the usual levels of quality and service, depends on the acceptance of this price increase.

4. Neutral evidence: A fundamental aspect of implementing a successful price adjustment will be achieving customer credibility. There should be no doubt that it is based on strict cost reasons, and it is not an increase in supplier margins.

5. Having a B plan: There should always be an alternative proposal, if customer resistance makes the increase unacceptable, or a lower percentage is accepted, or in longer terms. In such situations, the company should offer alternative proposals to the client, which involve keeping prices unchanged (or with a minor adjustment) but resigning some attributes or services included in the original proposal.

See full article at Fijaciondeprecios.com (In Spanish).

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"The cost determines my selling price" and "let's lower prices to win customers and then start raising them" are some of the phrases that should be avoided when designing a pricing strategy.

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