How to Increase Your Price
It is well known that price increment in certain industries, such as ink industry, is the most undesirable step to be taken from the view point of the sales executive. It is the nature of a sales executive to “serve and delighted” the customer well, even up to the higher level (product manager or GM) they reluctant to push through a price increment.
But it is the fact of life that without a reasonable price adjustment every year, the industry will drain its value and force the industry to keep on cutting all the cost.
But in a condition, such as economy crisis where interest is high, sales volume keeps on dropping, there is no way we can survive without a substantial price increase. Since I am still considered as a “young boy” in the old industry, I try to share my view which I had learnt from a course and some field experience with ink customer. Here are my opinions:
Value is defined as functional of a PRODUCT x PRICE LEVEL x PSYCHOLOGICAL EFFECT. People buy because they understand the VALUE of the product and the task of a sales executive is to convey and convince not only the tangible/functional value but also the intangible/service etc. value to the customer. E.g. post service Vs Courier Service even up to positioning why choose Fedex VS DHL, SQ VS Garuda.
The job of a sales executive is to continuously pushing up the perceived value of the product. So he/she should price the goods as high as the customer accepted, but usually it will beat back by the Market Price, that is why we have find all kind of differentiation to sell above market price.
It is normal, the customer will threaten you and squeeze you until the last drop when you dare to touch the subject of price increase. They will throw you out instantly!!! Subject closed !! Or dragging on to keep on status quo and delay the price increase.
Before we can push through the price increase we have to find out the following answer:
- What is our value in the customer’s mind?
- Usually the functional side can be easily known, if your product is no good they will even never think about you. But how about the intangible side (psychological) side?
- Do your customers like you service (technically, commercially, delivery?)
- How many % more can you sell with the big DIC name compared with a private label?
- Can your customer survive without, if you quit instantly? Or do they need a longer period? Can they afford the switching cost?
- Can we survive if we loose this customer? Do we have the courage to come back or find another new customer for survival?
The business world is about reality and the first law is Supply and Demand. You evaluate all the strength you have compared to your competitor, then carry out the price increase. The result will be positive then every body is happy, but also can be negative, then we have to work hard to build up and reposition ourselves in the industry.
Do it the professional way
- Convey all the valid reasons why we have to increase the price.
- Take the emotional side out of it.
- Take the personal side out of it. It is not my decision it is the management decision (blame the computer if you can) .
- Position yourself as the same boat with your counter partner (if in the big organization): We are in the same boat, pity me, may lose my job if I do not push through etc.
- If your counter partner is the owner, explain to him/her all benefits your product, you and your organization have been giving them. Make sure if they accept your price increment (rather than we stop supply), they will make more money in return.
- If they still do not accept, send them a professional letter state that we will only supply you as long as until our stock last, wait for their response (not too long), if still negative, pull the plug, But the game is not over.
- Keep monitoring (usually through the production side) how do they react, keep on contact, and look for chances to come back.
Quote from Sun Tze, the art of war:
- Know yourself (Do you know your strength?)
- Know your enemy (Do you know the weakness of your competitor and customer?)
- You will not defeated (They will not kick you out?)
- Know the Terrain (Does the customer have any instant alternative?)
- Know the Weather (The strategy of your competitor: hang on, also increase price or drop price?)
- Hundred battle, hundred victory (Your price increase will be accepted?)
- You cannot control the weather (what your customer/competitor think and do?), but a good general can choose the terrain and timing, where the charge has to be taken.
– Coach Cahyadi –
ActionCOACH South Jakarta business coaches guide businesses in selecting and implementing effective and cost-efficient marketing strategies to boost results with a proven 17-week guarantee. For more information on business coaching, visit www.actioncoachsouthjakarta.com or call 021 2567 5775 .
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