Price increases are inevitable. Over the course of a career in this (or any other) industry, you will no doubt be faced with the challenge of delivering bad news to a customer: We are going to be charging you more for the same goods and services. The event itself cannot be avoided but the customer gut-punch feeling can be as well as the “Will they leaves us?” question you will undoubtedly ask yourself if the news is delivered properly. The trick is to talk about the right cost increases in the right light while ignoring those which are more obvious and painful. Do it right and your client base will not only understand and actually support the news, they will gladly accept the increase.
The traditional route taken is to head right down Main Street via letter or email:
- “Paper costs are up. Sorry, we need to raise our prices.”
- “Labor costs are skyrocketing. Sorry, we need to raise our prices.”
Another method is more wordy but only slightly more effective: “We’ve done everything we can to keep our prices in check. In fact, for the past three years, we have not passed along any increases. However, with the cost of healthcare increasing double digits annually and meeting new regulatory requirements, we have no choice but to raise our prices. Sorry.”
Customers read these messages like this: “Whaa, whaa, whaa you are paying more.” After receiving this bad news, they do one of two things: Accept the increase begrudgingly or go shopping elsewhere. Neither is desirable. And even if they don’t switch, a well-timed cold call from a competitor might result in an appointment and that will not end well for you. Another possible outcome is when that no-bid order suddenly gets quoted around just “to keep you honest.”
Whether they eat the price increase or shop around, neither option is ideal and both have a negative aura that sticks around for quite a while. This means you lose something even if you keep the client. The first conversation or in-person sales call after the increase will have that “elephant in the room” feeling to it.
And you’re the elephant.
Delivering an “Our prices are going up like everyone’s so yours will too” message might be honest and direct, but it sounds both apologetic and whiny. It has an air of “It’s not our fault” that leaves the customer looking for a place to aim their anger.
But that’s life, right? Prices are going up everywhere. Groceries, gas, utilities are all increasing. “Why should we be any different?” you think.
Does it have to be that way? I’ll argue for “no!” Let’s change the narrative. Give this statement a read and pay special attention to how it feels in your gut as you take in the words.
“Our company is constantly thinking ahead to what’s next. Interactions with customers give us clues as to where you are headed and how we can get there first and create new capabilities so you can do more. We are currently investigating several new ideas. At the moment, there are 12 in all, and I’ll be honest with you: It is likely 10 of them will be rejected early in the evaluation process. Let me tell you about the two most promising and you tell me if you find value in them … ”
Those words were spoken by a presenter at a recent conference I attended. He then detailed new capabilities the company was investigating all while emphasizing what else his customers will be able to do as a result. Looking around the room, I saw smiles and nodding heads. It got really interesting when the presenter added, “Our budget for this new project development exceeds $600,000. The team doing the work makes up one-third of my workforce. This investment, however, comes at a price. It will eventually require us to increase the cost of our products. We just wanted to keep you informed.”
Okay, gut check time: As you read those last two paragraphs, can you feel the positivity of the message? POSITIVITY! By explaining the investment, highlighting the benefits to the customer, and infusing an air of anticipation, this company president brings excitement to a topic usually surrounded by dread, guilt, negative energy, assumptions, defections, and anxiety. He essentially said, “We are doing this for you. Our future together is bright. Aren’t you glad you buy from us?” Then, he delivers the inevitable price increase message, and it lands 1,000% more softly on the client’s ears.
Your cost increases are your problem. Don’t mention them to the client if possible. They don’t care. They have cost increases of their own.
Instead, talk about the investments you are making for the future. Heading to a conference to learn new skills? There’s a few thousand dollars you can talk about. Looking into new equipment? Unless you are picking something up off Craigslist, there is a story to be told. Tell it. Spending money on training employees? What will it allow them to do that they can’t do now? These are expenditures that add value to your offering and should not only be mentioned, they should be celebrated. Celebrated! Companies that fail to invest in the future live on borrowed time.
I can’t remember the exact quote or the name of the man who said it (I believe it was the president of R.R. Donnelley), but you’ll get the idea: “Ten years from now, 70% of our business will come from customers we do not currently have, and we will sell them products and services we do not currently offer.” Yes, you will need to spend money in order to be in business. Yes, your raw materials and labor costs will go up. And yes, you will need to pass along the bad news.
The conference speaker wrapped up his remarks with one more lesson for us all: Make sure you finish by complimenting your customers for being your customers …
“Finally, we thank you, our valued clients, for the loyalty you show us and the input you provide which pushes us into new products and services. We will continue to grow and invest as a way of earning your future business.”
Your cost of doing business is going up. Everyone gets that. Talk about the right increases and you will not only deliver a better message but leave customers feeling good about your relationship. You cannot hope for anything better.
Alternatively, talk only about your raw costs and you might as well send out a wedge of cheese to each client before you let the whine flow.
