When is the best time to sell a price increase? I get asked this question a lot and my response is “right now.” After I say this and see the expression on the person’s face, I then have to back up my response with my rationale.
Taking a price increase is not something to be taken lightly. It has to be done with confidence, and too often, salespeople will put off taking a price increase under some false belief that if they only wait a couple of weeks, some how things will be better.
Sure, waiting is an option, but often the only thing you’ll experience is more of a belief as to why you can’t take the increase, as well loss of the added revenue during that time frame.
My perspective is you can take a price increase anytime any of the following conditions occur:
- A competitor has gone up in price.
- You’ve incurred an increase in your costs.
- Your customers have just taken their prices up.
- Other key players in the industry are increasing their prices.
These four reasons are all what I refer to as “market factors,” and any one of them is certainly reason enough to advance.
Keep in mind, though, that just because one of the above is true does not mean you shouldincrease your price. It merely means the marketplace is giving you permission to do so.
Listed below are what I call “value factors.” These are the real reasons why you would want to take a price increase.
- Has your customer realized added value during the past year from using your products and/or services?
- Is your customer going to be realizing added value from what you provide them in the year to come?
- Are there improvements in service or performance you can document that your customer would see value in?
- Will you be able to increase your strategic importance to your customer in the year to come?
- Can you show your customer how what you provide them will give them a competitive advantage or minimize their risk in the year to come?
These are the real reasons why you can take a price increase. The reason I say you can take an increase is because your customer is seeing increased value in what it is you provide.
When the customer can see increased value, you have every right to increase your price. Yes, there could very well be other strategic or even tactical reasons why you would still not want to take a price increase. Those questions are going to be answered only when assessing your overall business plan.
Again, my perspective is you should take advantage of increasing your price whenever possible. Being proactive protects your bottom-line and provides you some protection against price increases with which you will have to deal on the production or operation side of what you make.
The more confident and comfortable you become in your pricing – including your price increases – the less likely you will be to devote precious effort and energy to worrying about your pricing. That effort and energy is better spent on showing your customer how the value of your product or service meets their needs and the benefits they desire.