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Positioning Price Increase Global Brief
Positioning Price Increase Global Brief
Positioning a Price
Increase While Preserving
the Relationship
Most businesses are confronted with disrupted supply chains, indexation, and a
shortage of raw materials. Consequently, profit margins are under pressure. Sales
leaders need a plan for delivering price increases to customers while preserving
the relationship.
Many companies have withheld transferring higher costs onto their customers, but time has run out and prices must
increase. Sales leaders have an opportunity to position themselves for this setting by developing a clear plan for
delivering price increases to customers.
But first it is important to understand the three factors that will carry higher operating costs into 2022:
First, supply chain problems are likely to persist as trucking backlogs, congested shipping ports, container ship
availability, and pent-up consumer demand add to the cost of transportation.
Second, raw material costs continue to rise as seen by a recent surge in the producer-price index which tracks
fluctuations in manufacturing and production costs for businesses.
Third, the “Great Resignation” is increasing labor costs. Resignation numbers in the US reached a record-breaking
number in 2021. As a result, bargaining power has shifted into the hands of employees. Labor indexation alone is
estimated to impact profit margins by 4.5%.
These characteristics all lead to one outcome: higher costs that will likely need to be offset with higher prices. At
Richardson Sales Performance we are training sales professionals to position higher prices while preserving the
relationship by:
01
APPLYING THE PRINCIPLES OF
BEHAVIOURAL ECONOMICS
Purchasing decisions are not purely rational. This idea is central to behavioural economics which
explores the effect of psychological, social, and emotional factors on decisions. Sales professionals
should consider three key biases influencing the customer’s choices and understand how to use
these biases to successfully position a price increase.
Loss Aversion
Loss aversion shows us that the disappointment people feel about losing something is much greater
than the amount of joy they get from gaining something of the same value. In other words, the pain
of a $100 loss is more intense than the joy of gaining $100. The bottom line: people prioritise
certainty above most other needs. Therefore, sellers should remind the customer of the certainty
they get from continuing with the solution even if it is at a higher price. If the customer rejects the
higher price in search of a lower cost, they are exposing themselves to uncertainty because other
providers are experiencing the same economic pressures.
Anchoring
Research from MIT psychology professor Dan Ariely shows us that people use a reference point
when making decisions. This reference point acts as an “anchor.” All subsequent information is
seen in comparison to the anchor. Sellers should provide an anchor that allows them to set a
psychological benchmark. Examples of effective anchors include market research showing the
elevated costs of similar solutions, higher operational costs in the seller’s business, and even the
absents of price increases until this point.
Scarcity Bias
Scarcity bias tells us that people will associate more value to a product or service that is considered
scarce. Therefore, sales professionals should make it clear that part of the reason for the higher
price is the scarcity of resources available and that the new, higher price ensures availability despite
economic disruptions.
How To Do It
Remind the customer Provide an Make it clear that the
of the certainty they anchor as a new, higher price
get from continuing psychological ensures availability
with the solution benchmark despite economic
disruptions
02
COMMITTING TO A THREE-PART PLAN FOR
DELIVERING A PRICE INCREASE
Positioning a price increase is a stress-inducing challenge. The customer might object to the new price.
The relationship might become strained. Sales professionals must be able to enter the conversation
with confidence. Doing so means having a clear plan for the conversation.
A formal plan also enables the sales leader to apply the same strategy
across a diverse group of sales professionals.
At Richardson Sales Performance we believe the most effective plan for delivering a price increase
consists of three parts: preparing for the conversation, notifying the customer of the price increase,
and engaging with the customer’s response. Each of these three parts contains a specific set of
behaviours.
Prepare
As sales professionals prepare, they need to conduct research on market trends and the competitive
landscape. They must also analyse the strength and weakness of their solution and gain clarity on the
intended outcome of the meeting.
Notify
When positioning the price increase to the customer, the sales professional should take deliberate
steps to set the context for the increase while reinforcing the relationship and explaining the rationale
for the change.
Respond
When engaging with the customer’s response, the seller must neutrally acknowledge any objections. A
neutral acknowledgement does not mean agreeing or disagreeing with the customer. Instead, it means
letting the customer know that their objection has been heard. This is a valuable opportunity to (re-)
shape perceptions of value so that the customer can understand why the higher price is warranted.
How To Do It
Understand the risks and Set the context for the Neutrally acknowledge
research market trends request while reinforcing objections, restate
and competitive the relationship and value and stay silent
pressures position the price increase
03
LEVERAGING A TRADING STRATEGY IF
NEEDED
Sometimes a trading strategy is needed. The most important part of this strategy is to never trade
on price. Instead, consider other trades without falling into one of the most common traps in a
negotiation: making a concession. A concession occurs when someone relinquishes something and
receives nothing in return.
Trading is more complex than giving to get. Implementing an effective trading strategy means
knowing what to trade, when to trade, and how to trade.
How To Do It
Know the value of Space the trades in Use specific,
what is being traded increments to make intentional language
before trading begins their value more that exudes
perceptible confidence and
clarity
In our programme sales professionals learn how to prepare for the customer conversation, deliver the
price increase, and respond to the customer’s reaction.
Most importantly, Positioning a Price Increase leverages the powerful principle of learn-by-doing with live
role play exercises that allow sales professionals to pressure test their skills. Positioning a Price Increase
enables sales professionals to go from concept-to-conversation in just two short training sessions.
Positioning a
Price Increase
Programme
Richardson Sales Two, 3.5-hour virtual Optional real-deal Digital pre-work
Performance’s new instructor-led sessions. coaching sessions to on Richardson’s
Positioning a Price Increase help sellers prepare Accelerate Sales
Programme is a blended for an upcoming Performance
offering: customer discussion Platform.
to position a price
increase.
info@richardsonsalesperformance.com
www.richardson.com/en-gb/