Only 5% of B2B companies succeed in their general (or periodic) price increases. 70% obtain mixed results at best, sometimes very much behind targets.
This poor performance is revealed in a recent survey conducted by the international journal of sales transformation and Corporate Visions.
This only confirms what seemed obvious: the most difficult conversation for salespeople is the when they have to get a price increase.
Obtaining a price increase in line with its objectives (and that does not erode after a few months) is certainly a difficult task, yet one of the most essential for the company’s sustainability and economic health.
According to the survey, however, no one lines up to give a helping hand to our sales people. Marketing or top managers get involved in only 20% of companies.
Often, the sales reps leave lighthearted to negotiate a price increase with the customers, with neither guidelines on the content of the conversation to be conducted (25% of the cases) nor with solid arguments aiming at justification in the rise (40% of the cases).
The reality is that insufficient attention has so far been devoted to how to structure the most relevant argumentation to increase price without driving the customer away.
Corporate Visions has conducted academic research with the University of Warwick to test the effectiveness of different messages.
The takeaway: use reference points and argue about incremental value
What proves to be inefficient:
What works best:
Refer to external factors that apply to all suppliers (make sure you are credible),
Introduce incremental improvements that meet identified needs (increase perceived value),
Propose to apply only a part of the increase (in return for a customer commitment: rapid contract renewal, etc.).
Chronic underinvestment by companies and their managers
The study shows, which is consistent with field observation, that managers often do not prepare and manage actively this specific process.
Many companies do not have formal processes, tools or specific practices. The tactic of almost uniform increase across all product categories or customers is still often practiced.
There is considerable room for improvement, setting then achieving ambitious and realistic objectives through activation of following measures:
Streamline process for sales people through recommendations for each couple customer X product,
Use cross-functional team to build effective messages, then have front staff rehearse argumentation
Set up a management loop to monitor progress, identify difficulties and correct them quickly.
To conclude, there are ways to avoid the general mediocre performance revealed by the study.
Since price increases are often negotiated at the end of the year, you cannot start to work on it in September. Think of Spring Cleaning and challenge your current practices right now!