How to Discuss a Price Increase With Clients
The last thing we want to do as an account executive is to rock the boat and give our clients a price increase. However, in this economic environment, price increases are a daily occurrence for companies worldwide. The Consumer Price Index rose 7.5% in the last 12 months according to the U.S. Bureau of Labor and Statistics. This increase represents the highest increase since 1982. So, if your sales manager has informed you a price increase is on the horizon, this article will outline what account executives can do to minimize the impact and retain your clients.
Manage Your Emotions
As an account executive, when your sales manager informs you about a price increase, your first reaction is, “Why do I have to be the bearer of bad news?” That is a natural reaction, but it’s not a reason to become upset. Having a bad attitude about the price increase will be a mistake for multiple reasons. First, it will reflect poorly with your sales manager and could impact how your organization perceives you. As the account executive, you own the relationship. You must take the good (commissions) with the bad (price increase).
Your second thought once reality sets in is how you will be handling the price increase and communicate the change without losing your client. Feeling anxious is natural. In your mind, you are worried the price increase will damage your relationship with your client. This may be true if you are selling commodities and have positioned yourself as the lowest-cost provider. But modern selling is more complex than being the lowest-cost provider. This is why we advocate to position yourselves as trusted advisors who provide solutions, not products. Either way, do not panic. Keep reading, and we will share practical advice on how to handle the challenge of raising prices with clients.
Pre-Price Increase Steps
In the best-case scenario, you’ve been given the heads-up by your sales manager that a price increase may be on the table. In the worst-case scenario, you had no warning and were informed at this morning’s sales meeting, which caused you to Google ‘how to handle a price increase as an account executive.’ Regardless of the amount of lead-time, you do not want to be the account executive that shows up on your client’s doorstep out of the blue informing them of a price increase. This is the surest way to antagonize your client. Avoid dropping the price increase without first prepping your client.
For example, when you are having a conversation with your client, you could ask what they are seeing on their end. You could ask business questions that relate to inflation and see how it is impacting their operations. Questions you might want to consider are:
- Are supply chain issues affecting your operation?
- What impact is this gasoline price hike having?
- Has inflation changed your priorities?
Having a candid dialogue around how inflation is impacting your client’s business is a wise move. First, you are demonstrating you care. Second, you are demonstrating business acumen. Third, you will gain insights into the clients’ plans and priorities, which will help you uncover new potential solutions you might not have considered. Finally, it will provide valuable insights you can only find from clients that will help you with future conversations with other clients and prospects.
During the conversation, you can agree that you are seeing the same thing on your end. Once you are both in the same boat, you can share, “I’ve heard our management is reviewing our pricing policy, nothing is official yet but everything is under review.” Your client will likely want more information, and you can let them know, “I will contact you as soon as I have an update.” As a side note, the bigger the increase and the bigger the client, the more advanced notice the better.
The Price Increase Conversation
As the account executive, how you deliver the price increase to your clients will determine how they react. When you deliver the price increase to your clients, it must be handled in a confident and concise manner. In other words, you want to prepare your words in advance, especially if your company has not provided any training.
Not only do you need to write down talking points or even a script, but you need to practice your delivery before you have contact with your first client. If your sales team does not role-play, ask another account executive to provide feedback. The more valuable the client, the more practice it will require. It is nearly impossible to deliver a confident message if you are anxious, have no prepared talking points, and have not practiced your delivery.
In your delivery, you want to balance displaying confidence and empathy. You do not want to come across brash, too assertive or apologetic. Never apologize for a business decision your company made. But you can acknowledge you feel uncomfortable. Here are a few examples:
- “Mr. Client, I feel awkward bringing this up…”
- “Mr. Client, I understand…”
- “Mr. Client, I know you are concerned…”
The key is to be authentic and transparent, but remember, emotions are contagious. Maintain a professional and confident demeanor. What you don’t want to do is open the conversation with:
“Mr. Client, I’m sorry to be the one to tell you…”
Once you have informed your client of the price increase, give the reasons why. When you use the word “because” and provide a reason, you will receive a higher positive response from people than when there is no “because” and no reason. For example, “The reason for the price increase is because our vendors have increased our supply cost and we strive to deliver the best quality.” In your pre-price call, you determined how inflation is impacting your client’s business and you can craft your message around that dialogue. At this point in the conversation, the goal is to have your client validate the reasons you provided.
After you have explained the “because,” you want to be sure to thank your client for their loyalty. You are their account executive, and as such, be sure to show appreciation.
“Mr. Client, I appreciate your openness, and I will share your feedback with my executive team. We appreciate the opportunity to serve you.”
Be Prepared for Push Back
Even if you did everything right with the price increase conversation, some clients may give you push back. Don’t be surprised if you hear,
“We’ve been a client for X years, and this is how you reward our loyalty? Let me talk to your manager please.”
Again, don’t panic, prepare for the possible pushback, and have an escalation plan ready. In your planning stage, write out all the negative things your clients could possibly say. Again, don’t apologize; it will send the wrong message. Also don’t over-explain because too much conversation can expand the problem. You will want to frame the conversation around the unique value you provide. Ideally, your management team has created a communication strategy, so you have a consistent message to deliver. What you don’t want to do is have a long-drawn-out conversation because this will only exasperate the situation.
Delivery Channel for Price Increase
If you are a field rep and visit clients in person, then an in-person meeting is the only way to deliver the price increase message. If you are an inside account executive, the next best way is with a video meeting. The third and final option is by telephone. This is not a situation where you can send an email or text. Again, the more valuable the client, the more likely you will need to be in-person.
The Final Word on Price Increase
The price increase conversation is one of the hardest conversations in sales. How you handle it will impact the outcome and reflect on your future leadership with your organization. As the account executive, you want to build value with every client conversation. The price increase conversation is no different. This is what will separate you from the competition and position yourself as the trusted advisor. If all products or services are equal, then the cheapest one is the most valuable by default. This is the worst possible position for any salesperson. As a trusted advisor, your clients will value you more because you bring solutions that add value. As Warren Buffet said, “Price is what you pay, value is what you get.” Value is like a magnet; people are drawn to it. Focus on the value you deliver, prepare and deliver your message with confidence, and your clients will appreciate your approach.
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